AR
Nedbank Limited
Annual Report
FOR THE YEAR ENDED 31 DECEMBER 2016
see money differently
Nedbank Ltd Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).
2016 highlights
Headline earnings of R10 143m
▲ 22,6% in 2016 (R8 275m in 2015)
NIR/expenses ratio 76,6%
(74,7% in 2015)
Return on equity 17,3%
(15,4% in 2015)
Common-equity tier 1 ratio 11,7%
(10,6% in 2015)
Credit loss ratio 67 bps
(78 bps in 2015)
Return on assets 1,20%
(1,05% in 2015)
Contents
Financial highlights
Ten-year review: Consolidated statement
of comprehensive income
Ten-year review: Consolidated statement of financial
position
Consolidated annual financial statements
Responsibility of our directors
Certification from our company secretary
Report from the Group Audit Committee
Directors’ Report
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
Notes to the consolidated financial statements
Section A: Accounting policies
A1
A2
Principal accounting policies
Key assumptions concerning the future and
key sources of estimation
Standards issued but not yet effective
Section B: Segmental and performance-related
A3
information
Segmental reporting
Dividends
Share capital
Additional tier 1 capital instruments
Net interest income
Non-interest revenue
Operating expenses
Taxation
Indirect taxation
B1
B2
B3
B4
B5
B6
B7
B8
B8.1
B8.2 Direct taxation
B8.3 Deferred taxation
B9
Non-trading and capital items
Section C: Core banking assets
C1
C2
C3
C4
C5
C6
C7
Loans and advances
Impairment of loans and advances
Government and other securities
Other short-term securities
Credit analysis of other short-term
securities, and government and other
securities
Cash and cash equivalents
Derivative financial instruments
Section D: Core banking liabilities
D1
D2
D3
Amounts owed to depositors
Long-term debt instruments
Contractual maturity analysis for financial
liabilities
Section E: Asset management
E1
E2
E3
Managed funds
Fair value of funds under management
Reconciliation of movement funds under
management
Section F: Investments
F1
Investment securities
4
6
8
10
10
11
12
16
19
22
22
23
24
26
27
27
27
28
28
29
29
32
33
34
35
36
38
39
39
39
40
42
43
43
50
53
53
54
54
55
60
60
61
62
64
64
64
64
65
65
F2
F3
Investments in private-equity associates,
associate companies and joint arrangements
Investments in subsidiary companies and
related disclosure
Interests in structured consolidated and
unconsolidated structured entities
Securitisations
Related parties
Section G: Generic assets
F5
F6
F4
G1
G2
Property and equipment
Intangible assets
Section H: Other assets
H1
H2
H3
Long-term employee benefits
Non-current assets held for sale
Other assets
Section I: Financial instruments
I1
I2
I3
I4
I5
I6
Consolidated statement of financial position
– categories of financial instruments
Fair-value measurement – financial
instruments
Assets and liabilities not measured at fair
value for which fair value is disclosed
Financial instruments designated as at fair
value through profit or loss
Offsetting financial assets and financial
liabilities
Collateral
Section J: Share-based payments
J1
J2
J3
J4
J5
Description of arrangements
Effect on profit and financial position
Movements in number of instruments
Instruments outstanding at the end of the
year by exercise price
Instruments granted during the year
Section K: Other liabilities
K1
K2
K3
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Commitments
Section L: Risk and balance sheet management
L1
L2
L3
L4
Capital management
Liquidity gap
Interest rate repricing gap
Historical value at risk (99%, one-day) by risk
type
Section M: Cashflow information
M
Cashflow information
Section N: Additional information
N1
N2
N3
N4
Foreign currency conversion
Events after the reporting period
Directors’ emoluments
Preference shareholders' analysis
Compliance with IFRS – financial statement notes
Information to our shareholders
Notice of our annual general meeting
Form of proxy
Notes to form of proxy
Contact details
Refer to nedbankgroup.co.za for the group’s Pillar 3 Risk and Capital
Management Report and for further information on the
qualifications of the group’s directors.
65
70
73
74
76
79
80
84
88
88
94
94
95
102
106
120
121
124
126
128
129
132
132
134
135
136
136
137
137
138
138
139
140
140
141
141
142
142
142
143
154
156
158
158
161
162
IBC
Nedbank Limited – Annual Report 2016
1
ABOUT THIS REPORT
Our consolidated annual financial statements provide a detailed analysis of our statutory accounting
records. These financial statements are independently audited as indicated in the independent auditors'
report and provide indepth disclosure and transparency on the financial performance of the group.
The notes to the consolidated annual financial statements are classified in the following sections:
Section A: Accounting policies
This section briefly outlines the basis of
preparation and key accounting policy elections
applied in the preparation of the group's
consolidated annual financial statements.
Section B: Segmental and performance-related
information
Refer to this section for information on the group's
financial performance. This section contains the
group's operational segmental report and
performance-related notes that provide an
analysis of the group's consolidated statement of
comprehensive income.
Section C: Core banking assets
This section provides information about the
group's core banking assets, including loans and
advances, and an analysis of the related
impairments charge. Information is also provided
on the group's investments in government and
other securities, and other short-term securities.
The group's cash and cash equivalents and
derivative financial instruments are also analysed
in this section.
Section D: Core banking liabilities
Information about the group's core banking
liabilities, including long-term debt instruments,
can be found in this section. A contractual
maturity analysis of financial liabilities is also
provided.
Section E: Asset management
Refer to this section for an analysis of the group's
funds under management.
Section F: Investments
This section provides an analysis of the group's
investments in investment securities, associate
companies, joint arrangements, private-equity
associates and subsidiaries. Related information,
such as related-party disclosure, information on
structured entities and securitisation vehicles can
also be found here.
Section G: Generic assets
This section provides an analysis of non-core
assets such as investment properties, property
and equipment, as well as goodwill and other
intangible assets.
Section H: Other assets
Refer to this section for disclosure on the group's
long-term employee benefits, non-current assets
and liabilities held for sale and other assets.
Section I: Financial instruments
Additional disclosure on the group's financial
instruments can be found in this section. Refer to
this section for the categorisation of financial
assets and liabilities, the fair-value hierarchy and
other fair-value-related disclosures. The group's
disclosure on collateral and offsetting of financial
assets and liabilities can also be found in this
section.
Section J: Share-based payments
This section details the group's share-based
payments schemes and their effect on the group's
financial position.
Section K: Other liabilities
This section provides an analysis of the group's
non-core liabilities, including provisions and other
liabilities, contingent liabilities, undrawn facilities
and commitments.
Section L: Risk and balance sheet management
Refer to this section for the group's liquidity gap
disclosure and details on the historical value at risk
and the interest rate repricing gap.
Section M: Cashflow information
This section contains notes to the group's
statement of cashflows.
Section N: Additional information
This section contains additional disclosure that
may be relevant to understanding the group's
consolidated annual financial statements, such as
a foreign currency conversion guide and
information on events after the reporting period.
2
Nedbank Limited – Annual Report 2016
Nedbank Limited – Annual Report 2016
3
Financial highlights
for the year ended 31 December
Headline earnings reconciliation
Profit attributable to equity holders of the parent
Non-trading and capital items
Non-trading and capital items
Taxation on non-trading and capital 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
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
2016
2015
9 896
(247)
(289)
42
10 143
3,41
0,67
44,1
57,6
61 908
17,3
718 901
900 061
1,20
425 405
11,7
12,9
16,0
8 163
(112)
(144)
32
8 275
3,07
0,78
43,9
58,8
56 170
15,4
674 935
860 733
1,05
415 541
10,6
11,5
14,1
27,9
358,3
36 355
27,6
358,3
30 030
86,74290
78,24198
42,75385
38,22487
43,98905
40,01711
82,77096
76,98627
925
960
810
107,2
899
983
825
54,4
Rm
Rm
Rm
Rm
Rm
%
%
%
%
Rm
%
Rm
Rm
%
Rm
%
%
%
m
m
cents
cents
cents
cents
cents
cents
cents
cents
m
4
Nedbank Limited – Annual Report 2016
Headline earnings
(Rm)
10 000
8 000
6 000
4 000
2 000
0
Expenses and efficiency ratio
(Rm)
Expenses (Rm)
Efficiency ratio (%)
25 000
20 000
15 000
10 000
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
3
4
1
0
1
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
5 000
0
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
3
8
2
5
2
,
6
7
5
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Total equity
(Rbn)
Total assets and return on total assets
(Rbn)
Total assets (Rbn)
Return on total assets (%)
70
60
50
40
30
20
10
0
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
,
7
7
6
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
1 000
800
600
400
200
0
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
0
0
9
2
,
1
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Net interest income to average
interest-earning banking assets
(%)
Non-interest revenue to total income
(Rm)
Non-interest revenue (NIR) (Rm)
NIR to total income (%)
5
4
3
2
1
0
20 000
15 000
10 000
1
,
4
8
3
,
5
3
,
,
2
3
,
2
3
4
3
,
4
3
,
5
3
,
3
3
,
4
3
,
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
5 000
0
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
1
6
3
9
1
1
,
4
4
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Nedbank Limited – Annual Report 2016
5
%
80
60
40
20
0
%
1,5
1,2
0,9
0,6
0,3
0
%
50
40
30
20
10
0
Ten-year review
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Rm
Interest and similar income
Interest expense and similar charges
Net interest income
Impairments charge on loans and advances
Income from lending activities
Non-interest revenue
Operating income
Total operating expenses
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
Profit attributable to:
– Ordinary and preference equity holders
– Non-controlling interest – ordinary shareholders
– Non-controlling interest – preference shareholders
Profit for the year
Headline earnings
2016
69 862
45 344
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
(289)
13 243
(20)
13 223
3 286
9 937
9 896
41
9 937
10 143
2015
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
2014
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
2013
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
2012
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
2011
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
2010
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
2009
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
224
15
4 029
3 823
2008
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
217
15
6 338
5 469
3 790
6 106
2007
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
6
Nedbank Limited – Annual Report 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit from operations before non-trading and capital items
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-trading and capital 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
Profit for the year
Headline earnings
Share of (losses)/profits of associate companies and joint arrangements
2016
69 862
45 344
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
(289)
13 243
(20)
13 223
3 286
9 937
9 896
41
9 937
10 143
2015
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
2014
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
2013
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
2012
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
2011
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
2010
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
2009
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
2008
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
3 790
6 106
224
15
4 029
3 823
217
15
6 338
5 469
2007
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
Nedbank Limited – Annual Report 2016
7
TEN-YEAR REVIEW (continued)
CONSOLIDATED 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
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
Additional tier 1 capital instruments
Non-controlling interest attributable to:
– ordinary shareholders
– preference shareholders
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Current taxation liabilities
Other liabilities held for sale
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
20 241
68 218
18 044
50 687
18 151
60 078
30 948
42 733
10 757
56 322
15 644
26 828
17 467
35 004
13 811
31 279
691 925
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
375 421
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
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
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
28
19 182
42 698
61 908
3 561
2 000
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
253
223
183
141
136
121
110
67 722
13 469
59 954
33 996
55 980
15 479
51 675
16 588
750 319
708 036
634 623
585 497
542 671
516 540
491 038
467 924
464 082
12 717
53
391
3 328
52 062
9 911
87
8 404
10 016
35
13
763
3 009
44 977
287
3 002
35 634
297
1 804
33 265
832 339
800 779
697 464
647 480
598 064
570 553
538 090
506 997
510 690
427 495
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
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
9 273
67
36
367
1 880
30 295
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
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
42 987
13 791
38 400
11 930
8 286
27
997
1 473
29 439
6 179
76
1 358
1 408
26 101
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
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
9 545
11 775
9 924
29 271
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
20 082
14 060
8
Nedbank Limited – Annual Report 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
691 925
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
375 421
12 587
37 575
14 660
26 194
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
9 545
11 775
9 924
29 271
4 528
241
2 832
508
1 029
362
84
6 171
1 992
12 641
3 830
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
4 920
29
2 739
735
65
75
3 757
1 305
8 351
2 715
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
27
17 422
26 140
43 589
3 561
27
14 422
24 856
39 305
3 561
27
14 422
20 281
34 730
3 560
253
223
183
141
136
121
110
59 954
33 996
55 980
15 479
51 675
16 588
47 286
13 475
42 987
13 791
38 400
11 930
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
750 319
708 036
634 623
585 497
542 671
516 540
491 038
467 924
464 082
9 911
87
8 404
10 016
35
13
763
3 009
44 977
287
3 002
35 634
297
1 804
33 265
9 273
67
36
367
1 880
30 295
8 286
27
997
1 473
29 439
6 179
76
1 358
1 408
26 101
5 218
162
1 514
1 298
6 145
117
1 982
1 227
20 082
14 060
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
832 339
800 779
697 464
647 480
598 064
570 553
538 090
506 997
510 690
427 495
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
460 627
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
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
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
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
Additional tier 1 capital instruments
Non-controlling interest attributable to:
– ordinary shareholders
– preference shareholders
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Current taxation liabilities
Other liabilities held for sale
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
20 241
68 218
18 044
50 687
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
28
19 182
42 698
61 908
3 561
2 000
67 722
13 469
12 717
53
391
3 328
52 062
Nedbank Limited – Annual Report 2016
9
Consolidated annual financial statements
The consolidated annual financial statements were audited in terms of the Companies Act, 71 of 2008.
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 2016, 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 (IASB) and International Financial
Reporting Interpretations Committee (IFRIC), 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, 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 27 February 2017 and are signed on its behalf by:
V Naidoo
Chairman
Sandown
27 February 2017
MWT Brown
Chief Executive
10
Nedbank Limited – Annual Report 2016
Certification from our company secretary
In terms of Section 88(2)(e) of the Companies Act, 71 of 2008, 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
27 February 2017
Nedbank Limited – Annual Report 2016
11
Report from the Group Audit Committee
‘The Audit Committee continues to play an essential role in
ensuring the integrity and transparency of corporate reporting.
This year the committee paid specific attention to the key
accounting issues and key audit matters, including the
scheduling of two additional ad hoc meetings.’
The Nedbank Group Audit Committee (GAC) is pleased to
present its report for the 2016 financial year. This report has
been prepared based on the requirements of the South African
Companies Act, 71 of 2008 as amended (the Companies Act),
the King Code of Governance for South Africa (King III and
King IV), the Johannesburg Stock Exchange (JSE) Listings
Requirements and other applicable regulatory requirements.
The GAC’s main objective is to assist 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.
The report aims to provide details on how the GAC has
satisfied its various statutory obligations during the period as
well as discuss some of the significant matters that arose and
how the GAC has addressed these to assist in ensuring the
integrity of Nedbank’s financial reporting.
Composition and governance
The committee is chaired by Malcolm Wyman who, together
with the other four members – Nomavuso Mnxasana, Mpho
Makwana, Tom Boardman and Stanley Subramoney, are all
independent non-executive directors. The Chief Executive (CE),
the Chief Financial Officer (CFO), the Chief Operating Officer,
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 discuss 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. In addition, the GAC meeting agenda allows for a
meeting solely with the members of the GAC.
Eight GAC meetings were held in respect of the 2016 financial
year aligned with the key reporting and regulatory timelines
and included two additional ad hoc meetings. The meetings’ key
focus areas were:
4 May 2016
1 Jul 2016
14 Jul 2016
27 Jul 2016
Review Nedbank Ltd Banks Act Returns Audit
Report and approve and discuss the 2016
external audit strategy presentation. Review
first-quarter trading update.
Annual trilateral meeting with representatives
of the Bank Supervision Department of the
South African Reserve Bank (SARB) where,
among other things, key external audit findings,
internal audit matters and reporting
responsibilities in terms of the regulations are
discussed.
Ad hoc meeting to review key financial and
accounting judgements in respect of the
associate investment in Ecobank.
Review of the interim results for the six months
to 30 June 2016 and the press and SENS
announcements.
27 Oct 2016
Review and approve the Nedbank Group
Internal Audit Plan for 2017.
23 Jan 2017
13 Feb 2017
23 Feb 2017
Review and approve key financial policies.
Review of unaudited preliminary results and key
financial and accounting judgements including
associate investment in Ecobank.
Ad hoc meeting to review key financial and
accounting judgements in respect of the
associate investment in Ecobank.
Discussion and review of year-end reports from
Internal Audit and External Audit, feedback
from subsidiary audit committees, Credit
Committee, Risk Committee, IT Committee
and other relevant committees.
Review and approval of annual financial
statements and related SENS and results
announcements.
There was full attendance from the members for the above
meetings with the exception of Mpho Makwana who extended
apologies for two of the meetings listed above.
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 require
action and providing recommendations for their resolution.
The performance of the committee is reviewed annually as part
of the effectiveness review of the board and of all its
committees. The 2016 review concluded that the committee
continued to operate effectively and successfully discharged its
responsibilities and duties.
Significant audit matters
With the enhancement of the new audit report, the GAC has
considered the appropriateness of the key audit matters
reported in the external audit opinion. The GAC also considered
the significant audit matters relating to the annual financial
statements and how these were addressed by the committee.
12
Nedbank Limited – Annual Report 2016
Significant
matter¹
How the GAC addressed the matter
Impairment
of loans and
advances
The GAC reviewed and discussed the reports from the Group Credit Committee regarding the level and
appropriateness of impairments, provisioning methodologies and related key judgements in determining the
impairment balances, and satisfied itself as to the appropriateness of the level of impairments.
Valuation of
financial
instruments
held at fair
value
Taxation
exposures and
related
provisions
Associate
investment in
Ecobank
The GAC reviewed and challenged 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. The GAC satisfied itself that the process followed was reasonable.
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, and were satisfied that these were reasonable.
The GAC received regular reports from management in connection with the financial performance of Ecobank
Transnational Incorporated (ETI) and the accounting considerations for Nedbank. The GAC received
comprehensive reports detailing management’s assessment of value in use (VIU) of the investment and the
resulting impairment review. The GAC reviewed and discussed management’s key assumptions, challenged the
appropriateness of the judgement applied to the calculation and considered the sensitivity of the result of the
impairment review to changes in estimates and assumptions.
The GAC noted that the determination of the VIU calculation in accordance with IFRS is subject to signification
judgement and concluded that the impairment raised was reasonable.
¹
The significant matter ‘Associate investment in Ecobank’ relates only to the consolidated results of Nedbank Group Ltd while the other significant matters relate
to Nedbank Ltd, Nedbank Ltd Consolidated and Nedbank Group Ltd.
Financial and regulatory 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. During the year Nedbank implemented a
SAP enterprise resource planning system to enhance the
financial reporting system and processes.
The GAC received regular feedback from the CFO regarding the
implementation of the solution as well as post-go-live reporting
to ensure that the control environment remained effective.
The GAC is satisfied with the appropriateness of the expertise
and experience of the CFO and the resource, expertise,
succession and experience of Nedbank’s finance function. The
GAC reviewed the adequacy of the regulatory reporting
processes as required by the Banks Act of SA, 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.
Annual financial statements and integrated reporting
process
The GAC reviewed the audited annual financial statements and
assessed, and found to be effective and appropriate, the
financial reporting process and controls that led to the
compilation of the annual financial statements. The GAC also
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 reviewed and discussed the integrated report,
reporting process and governance and financial information
included in the integrated report after considering
recommendations from the Group Transformation, Social and
Ethics Committee (GTSEC), the Group Remuneration
Committee, the Group Risk and Capital Management
Committee (GRCMC) 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.
Future accounting developments
The IASB has published IFRS 9: Financial Instruments, IFRS 15:
Revenue from Contracts with Customers and IFRS 16: Leases,
with the effective date of implementation of 1 January 2018 for
IFRS 9 and IFRS 15, and the effective date of 1 January 2019 for
IFRS 16.
An IFRS 9 Impairments Implementation Programme has been
set up to prepare for the implementation of IFRS 9 and is jointly
sponsored by the CRO and the CFO. Significant progress has
been made with parallel reporting scheduled for the latter part
of 2017. The classification and measurement and hedging
requirements programme is sponsored by the CFO, and is
aligned to the impairments programme timetable. The GAC
and Group Risk Committee (GRC) received regular reporting
updates and specific training updates to understand and
remain abreast of key judgement areas.
In respect of IFRS 15: Revenue and IFRS 16: Leases the overall
impact to Nedbank will not be significant, although certain
Nedbank Limited – Annual Report 2016
13
REPORT FROM THE GROUP AUDIT COMMITTEE (continued)
systems, processes and disclosures will have to be enhanced.
Nedbank determined the overall impact as not significant.
The GAC is satisfied with the appropriateness of the expertise,
experience and resources of the internal audit function.
Internal control and risk management
The GAC 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 of 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.
The GAC receives regular reports from the Group Information
Technology Committee regarding the monitoring of the
adequacy and effectiveness of the group's information systems
controls, and from the Group Credit Committee regarding its
oversight of the adequacy and effectiveness of the credit
monitoring processes and systems.
The GAC also 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.
Internal Audit
Internal Audit performs an independent assurance function and
forms part of the third line of defence. The CIA has a functional
reporting line to the GAC Chair and an operational reporting
line to the CRO.
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 had 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.
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. The
annual review of the quality of the audit and the
performance of the joint external auditors was undertaken
by means of questionnaires completed by key finance staff,
internal audit members and members of the GAC.
The GAC has a well-established policy on auditor independence
and audit effectiveness. The GAC 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.
The GAC is of the view that the group external auditors
continue to provide an efficient, effective and independent
audit service, and recommended to the board the
reappointment of the external auditors for 2017.
The GAC continues to monitor the developments and reports
from the Independent Regulatory Board of Auditors (IRBA) in
connection with mandatory audit rotation.
As part of Nedbank’s transformation commitment and the
development of the auditing profession, Nedbank identified a
number of smaller statutory audits during 2016, which were put
out to tender and awarded to a mid-tier black-owned
accounting firm, with effect from 2017.
Combined assurance
Nedbank has introduced a combined assurance programme
across the group with the key intention of optimising the
efficiency and effectiveness of the activities of risk
management, compliance and audit, and to better illustrate,
consolidate and report on all assurance activities.
Management has established a combined assurance
framework and project plan that engages with the three lines
of defence. An effectiveness framework is also in the process of
being integrated into the combined assurance framework.
14
Nedbank Limited – Annual Report 2016
This process will ensure a continuum of assurance being
provided through testing, validation and verification of controls
and risk management frameworks.
The GAC is of the view that the arrangements in place for the
combined assurance model are adequate and is achieving the
objective of a more effective, integrated approach across the
disciplines of risk management, compliance and audit. The
journey of combined assurance will continuously evolve as the
process matures within the organisation.
Key focus areas for 2017
■ Review and consideration of management's plans in respect
of future changes to the IFRS and other regulations, most
notably:
IFRS 9: Financial Instruments – including review of the
outcome of parallel reporting during 2017 and review and
assessment of the key judgements.
IFRS 15: Revenue – including review of the final
implementation assessment of impact on systems,
processes and disclosure.
King IV: Assessment of the updated requirements to be
complied with from 1 April 2017.
■ 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.
■ Monitoring of management’s operating model review to
ensure that governance and controls processes remain
robust during this time and after the resulting changes have
been implemented.
■ Continued focus on the accounting implications and
resulting judgments pertaining to the ETI associate
investment.
■ Monitoring the developments and reports from the IRBA in
connection with mandatory audit rotation and ensuring that
appropriate action is taken.
On behalf of the GAC
M Wyman
Group Audit Committee Chair
27 February 2017
Nedbank Limited – Annual Report 2016
15
Directors’ Report
for the year ended 31 December 2016
The board of directors is pleased to present the annual
financial statements of Nedbank Ltd for the year ended
31 December 2016.
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 the JSE.
Annual financial statements
Details of the financial results are set out on pages 22 to 157 of
the annual financial statements, which have been prepared
under the supervision of the Nedbank CFO, Mrs RK Morathi,
and audited in compliance with IFRS as issued by the IASB and
the IFRIC, 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.
Year under review
The year under review is fully covered in the Chairman's Review,
Chief Executive's Review, Growing our Franchises section, the
Chief Operating Officer’s Review, and the Financial Report
sections of the 2016 Nedbank Group Integrated Report,
available at nedbankgroup.co.za.
Share capital
Details of the authorised and issued share capital, together
with details of shares issued during the year, appear in note B3
to the annual financial statements.
Ownership
The holding company of Nedbank Ltd 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 N3 to the annual financial statements.
Dividends
Details of the dividends appear in note B2 to the annual
financial statements.
Directors
Biographical details of the current directors appear in the 2016
Nedbank Group Integrated Report. 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 Remuneration Report
available at nedbankgroup.co.za.
During the period under review the following changes occurred
to the Nedbank board:
■ Errol Kruger was appointed as an independent non-
executive director on 1 August 2016; and
■ Robert Leith was appointed as a non-executive director on
13 October 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.
Errol Kruger and Robert Leith were appointed by the board of
directors since the previous Nedbank annual general meeting
on 4 May 2016 and in terms of the memorandum of
incorporation, their appointments terminate at the close of the
annual general meeting to be held on 17 May 2017. They are
available for election. Mike Brown, Brian Dames, Mpho
Makwana and Joel Netshitenzhe are also required to seek
reelection at the annual general meeting. The aforementioned
directors make themselves available for reelection and
separate resolutions will be submitted for approval at the
annual general meeting to be held on 17 May 2017.
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 from the
board unless agreed otherwise by the board. 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.
16
Nedbank Limited – Annual Report 2016
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
Date resigned/retired as
director (where applicable)
DKT Adomakoh (Ghanaian)
TA Boardman
MWT Brown
BA Dames
Independent non-executive
director
Independent non-executive
director
21 February 2014
1 November 2002
(1 March 2010 as
non-executive, 1 January 2014
as independent non-executive)
Chief Executive and executive
director
17 June 2004
Independent non-executive
director
30 June 2014
ID Gladman
Non-executive director
7 June 2012
PB Hanratty (Irish)
Non-executive director
8 August 2014
12 March 2016
JB Hemphill
EM Kruger
RAG Leith
PM Makwana
MA Matooane
NP Mnxasana
RK Morathi
V Naidoo
JK Netshitenzhe
MC Nkuhlu
S Subramoney
Non-executive director
25 November 2015
Independent non-executive
director
1 August 2016
Non-executive director
13 October 2016
Independent non-executive
director
Independent non-executive
director
Independent non-executive
director
Chief Financial Officer and
executive director
17 November 2011
15 May 2014
1 October 2008
1 September 2009
Chairman and non-executive
director
1 May 2015
Independent non-executive
director
Chief Operating Officer and
executive director
Independent non-executive
director
5 August 2010
1 January 2015
23 September 2015
MI Wyman (British)
Lead independent director
1 August 2009
Directors' interests
Nedbank Group holds the issued ordinary shares.
The directors' interests in ordinary shares in Nedbank Group
and non-redeemable, non-cumulative, non-participating
preference shares in Nedbank at 31 December 2016 are set out
online in the full supplementary Remuneration Report. 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 to 15 and the
Group Transformation, Social and Ethics Committee Report
appears in the 2016 Nedbank Group 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 24 February 2017 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
throughout 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 are available
at nedbankgroup.co.za.
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.
Nedbank Limited – Annual Report 2016
17
Directors’ Report (continued)
for the year ended 31 December 2016
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.
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 Remuneration Report, which can be
found at nedbankgroup.co.za.
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 R125m, 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 F3 to the annual financial statements available at
nedbankgroup.co.za.
Special resolutions by subsidiaries
■ 23 May 2016 by Esimio Trading 101 Ltd regarding the
conversion from a public company to a private company.
■ 23 May 2016 by Pyraned Ltd regarding the conversion from a
public company to a private company.
■ 23 May 2016 by MHF Properties Ltd regarding the conversion
from a public company to a private company.
■ 15 July 2016 by Depfin Investments (Pty) Ltd for the
reclassification of 310 class N no-par-value preference
shares.
■ 1 November 2016 by IBL Asset Finance and Services Ltd
regarding the conversion from a public company to a private
company.
■ 21 November 2016 by Depfin Investments (Pty) Ltd
regarding the reclassification of 864 343 class O 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
The directors are not aware of any other material events that
have occurred between the reporting date and
27 February 2017.
18
Nedbank Limited – Annual Report 2016
Independent auditors’ report to the shareholders of Nedbank Ltd
Report on the audit of the consolidated financial
statements
Opinion
We have audited the consolidated financial statements of
Nedbank Limited and its subsidiaries (the group) set out on
pages 22 to 153, which comprise the consolidated statement of
financial position as at 31 December 2016, and the consolidated
statement of comprehensive income, consolidated statement
of changes in equity and consolidated statement of cashflows
for the year then ended, and the notes to the consolidated
financial statements, including a summary of significant
accounting policies.
In our opinion, the consolidated financial statements present
fairly, in all material respects, the consolidated financial
position of Nedbank Limited as at 31 December 2016, 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.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities
for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Group in accordance
with the Independent Regulatory Board for Auditors Code of
Professional Conduct for Registered Auditors (IRBA Code) and
other independence requirements applicable to performing
audits of financial statements in South Africa. 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 South Africa. The IRBA Code
is consistent with the International Ethics Standards Board for
Accountants Code of Ethics for Professional Accountants
(Parts A and B). We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements for the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion
on these matters.
Key audit matter
How the matter was addressed in the audit
IMPAIRMENT OF LOANS AND ADVANCES
Refer to C2 for selected disclosures applicable to this matter.
Loans and advances, which represent 77% of total assets, and the
associated impairment provisions are significant in the context of
the consolidated financial statements.
The estimation of credit losses is inherently uncertain and is
subject to significant judgement. Furthermore, models used to
determine credit impairments are complex, and certain inputs
used are not fully observable. Management compensates for any
model and data deficiencies by applying overlays to these outputs,
which increase the provision. The valuation of these overlays can
be highly subjective.
This estimation uncertainty is heightened due to the ongoing
volatility in South Africa and wider regional economies. These
factors, individually and collectively, result in a significant risk that
credit impairments for loans and advances may be materially
misstated.
The Corporate and Investment Banking (CIB) cluster lends to
corporate, institutional and public sector clients. CIB loans
represent 54% of total loans and advances. Advances in CIB are
typically individually significant, and therefore individually
assessed for impairment. The assessment process requires
detailed knowledge of the borrower and requires credit officers to
use judgement to determine whether a loss event has occurred
and the amount of the resulting loss.
The Retail and Business Banking (RBB) cluster lends to small and
medium-sized businesses and to individuals. RBB represents 42%
of total loans and advances. These loans and advances are
typically lower value and are assessed collectively by grouping into
homogenous portfolios for monitoring and impairment
assessment. This process relies on models to determine incurred
losses across the portfolios.
Given the combination of inherent subjectivity in the valuation,
and the material nature of the balance, we considered the
valuation of loan loss provisions to be a key audit matter in our
audit of the consolidated financial statements.
Our audit included identifying relevant controls that address the
impairment risks identified and evaluating the design and
implementation, and where possible the operating effectiveness,
of these controls. We focused on controls over the identification
of impairment losses; the governance processes in place for
credit models, inputs and overlays; the credit forums where key
judgements are considered; and how the directors ensure they
have appropriate oversight over loan provisions.
In the CIB cluster:
■ We selected a sample of performing loans and advances and
performed a detailed independent assessment of the credit
losses identified, focusing on whether there is evidence of an
incurred loss.
■ For a sample of loans and advances that had been individually
assessed and impaired, including those loans on the watch list,
we independently challenged the valuation of impairment
losses that had been incurred, including developing our own
expectation of the amount of the provision.
■ In order to focus our procedures on the areas where there is
a higher risk, we performed detailed credit loss assessments
of loans and advances with higher-risk credit grades. We also
performed focused testing of loans in higher-risk and
economically exposed sectors such as construction, oil and
gas, mining and government-related institutions.
■ When performing work on the valuation of provisions, we
paid particular attention to the valuation of, and rights to,
security held. Where management has used specialists to
provide valuations, we assessed their competence and the
timeliness of these valuations.
■ We used our internal credit specialists to critically assess
impairment models and the key assumptions that drive the
collective impairment valuation.
Nedbank Limited – Annual Report 2016
19
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDER OF NEDBANK LTD (continued)
Key audit matter
How the matter was addressed in the audit
In the RBB cluster, impairment provisions are model-driven and
we therefore focused on the data used to generate impairment
provisions, as well as the appropriateness of key models, by:
■ Testing the historical accuracy of models by assessing
historical projections against actual losses.
■ Focusing on the most significant model assumptions,
including probability of default, loss given default, and roll
rates. We performed detailed procedures on the
completeness and accuracy of the information used, and
also compared internal data and assumptions to those used
more widely in the market.
■ Using our internal credit specialists to assess the
appropriateness of the models used for each significant
product type, and to perform an independent recalculation
of the impairment provision for selected portfolios using our
challenger models.
■ Challenging the appropriateness of post model adjustments
made by management by assessing evidence to support the
overlays. Where we concurred that the overlay was valid, we
used our internal credit specialists to perform an independent
valuation of the amounts.
VALUATION OF FINANCIAL INSTRUMENTS HELD AT FAIR VALUE
Refer to I2 for selected disclosures applicable to this matter.
At 31 December 2016, financial assets at fair value through profit
or loss (FVTPL) represented 19% of total assets and financial
liabilities at FVTPL represents 11% of total liabilities. Available for
sale (AFS) financial assets represented 0.1% of total assets. Of
the financial instruments (both assets and liabilities) carried at
fair value or as AFS, 1% were classified as level 3.
Financial instruments that are classified as level 2 or level 3 in the
fair value hierarchy will have some element of estimation
uncertainty inherent in their value, and the uncertainty is higher
for level 3 financial instruments which, by their nature, are
unobservable. These portfolios include unlisted equity
investments, loans and advances and certain derivative
instruments.
As part of our audit, we identified relevant controls over
valuation of financial instruments and evaluated the design and
implementation, and where possible the operating
effectiveness, of these controls. We focused on controls over
model governance, independent price verification and the daily
profit and loss attribution processes.
We assessed the models used by management and rates
applied at year-end, and used valuation tools to re-perform
valuations across a range of financial instruments.
For portfolio adjustments, we focused on the appropriateness
of any changes made to the valuation methodology and inputs
during the year. Additionally, these were benchmarked to
current market best practices to assess the appropriateness of
the methodologies applied.
This risk applies to both individual financial instruments and also
to portfolio valuation adjustments which are applied to adjust
portfolios for risks that are not included in the model valuation.
These portfolio adjustments are subjective in nature and may
rely on inputs that are unobservable.
For unlisted private-equity investments and investment
securities, we challenged the key inputs and assumptions driving
the valuation, and assessed the models used. We considered
sensitivities to key factors including:
■ assessing the appropriateness of the pricing multiples
In addition certain financial instrument valuation techniques are
subject to ever-developing market practices which may increase
the estimation uncertainty.
As the determination of the fair value of certain financial
instruments is a key source of estimation uncertainty, is subject to
significant management judgement and represents a material
balance, this matter was considered to be a key audit matter in
our audit of the consolidated financial statements.
available from comparable listed companies, adjusted for
comparability differences, size and liquidity; and
■ assessing the reasonability of the cashflows and discount
rates used by comparing them to similar instruments.
We also assessed the disclosures made relating to the valuation
of financial instruments to ensure consistency with the
requirements of the relevant accounting standards and with
the methodologies applied by management.
Other information
The directors are responsible for the other information. The other
information comprises the Directors’ Report, the Report from the
Group Audit Committee and the Certification from the Company
Secretary, as required by the Companies Act of South Africa, as
well as the additional information contained in the ‘Audited
Consolidated Annual Financial Statements’, which we obtained
prior to the date of this report. The other information also
comprises the annual report, which is expected to be made
available to us after the date of this report. The other information
does not include the consolidated financial statements and our
auditors’ report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other
information that we obtained prior to the date of this auditors’
report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We
have nothing to report in this regard.
Nedbank Limited – Annual Report 2016
20
Responsibilities of the directors for the consolidated
financial statements
The directors are responsible for the preparation and fair
presentation of the 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.
In preparing the consolidated financial statements, the
directors are responsible for assessing the group’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative
but to do so.
Auditors’ responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or
error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional scepticism
throughout the audit. We also:
■ Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to fraud
or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
■ Obtain an understanding of internal control relevant to the
audit 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 group’s
internal control.
■ Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the directors.
■ Conclude on the appropriateness of the directors’ use of the
going-concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant
doubt on the group’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the
related disclosures in the consolidated financial statements
or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained up
to the date of our auditors’ report. However, future events
or conditions may cause the group to cease to continue as a
going concern.
■ Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and
events in a manner that achieves fair presentation.
■ Obtain sufficient appropriate audit evidence regarding the
financial information of the entities and business activities
within the group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the directors regarding, among other
matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies
in internal control that we identify during our audit.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on
our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we
determine those matters that were of most significance in the
audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe
these matters in our auditors’ report unless law or regulation
precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on other legal and regulatory requirements
In terms of the IRBA Rule published in Government Gazette
Number 39475 dated 4 December 2015, we report that Deloitte
& Touche has been the auditor of Nedbank Limited for 43 years
and KPMG Inc. has been the auditor of Nedbank Limited for
43 years.
KPMG Inc
Registered Auditor
Per: Sipho Malaba
Director
KPMG Crescent
85 Empire Road
Parktown
2193, South Africa
27 February 2017
Deloitte & Touche
Registered Auditor
Per: Mgcinisihlalo Jordan
Partner
Building 8, Deloitte Place
The Woodlands, Woodlands Drive
Woodmead, Sandton
Nedbank Limited – Annual Report 2016
21
Consolidated statement of comprehensive income
for the year ended 31 December
Interest and similar income
Interest expense and similar charges
Net interest income
Impairments charge on loans and advances
Income from lending activities
Non-interest revenue
Operating income
Total operating expenses
Indirect taxation
Profit from operations before non-trading and capital items
Non-trading and capital items
Profit from operations
Share of losses of associate companies and joint arrangements
Profit before direct taxation
Direct taxation
Profit for the year
Other comprehensive (losses)/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
Notes
B5.1
B5.2
C2.1
B6
B7
B8.1
B9
B8.2.1
2016
Rm
69 862
45 344
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
(289)
13 243
(20)
13 223
3 286
9 937
(453)
(231)
(13)
24
(233)
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
9 484
8 788
9 896
41
9 937
9 443
41
9 484
8 163
47
8 210
8 739
49
8 788
22
Nedbank Limited – Annual Report 2016
Consolidated statement of financial position
at 31 December
ASSETS
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and 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
Additional tier 1 capital instruments
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 R23,8bn (2015: R19,9bn).
Included in amounts owed to depositors are deposits from fellow subsidiaries amounting to R31,4bn (2015: R21,5bn).
Notes
2016
Rm
2015
Rm
C6
C4
C7
C3
C1
H3
F1
H2
F2
B8.3
G1
H1
C6
G2
B3.1
B3.2
C7
D1
K1.1
B8.3
H1
D2
20 241
68 218
18 044
50 687
18 151
60 078
30 948
42 733
691 925
666 807
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
900 061
860 733
28
19 182
42 698
61 908
3 561
2 000
253
67 722
13 469
28
18 532
37 610
56 170
3 561
223
59 954
33 996
750 319
708 036
12 717
53
391
3 328
52 062
9 911
87
763
3 009
44 977
832 339
800 779
900 061
860 733
Nedbank Limited – Annual Report 2016
23
Consolidated statement of changes in equity
for the year ended 31 December
Number of
ordinary
shares
Ordinary
share capital
Rm
27 241 024
314 625
27
1
Ordinary
share
premium
Rm
17 422
1 110
Share-based
Other
payments
distributable
Available-for-
distributable
and
Additional
ordinary
reserve³
reserves⁴
sale reserve⁵
reserves⁶
of the parent
premium
tier 1 capital
shareholders
Rm
Rm
Rm
instruments
Total equity
attributable
to
equity
holders
Preference
share
capital
Non-
controlling
interest
attributable
Reserves
Other
non-
Rm
80
Rm
(515)
Reserves
Foreign
currency
translation
reserve¹
Rm
Property
revaluation
reserve²
Rm
162
1 664
33 380
52 236
3 561
190
118
–
–
(9)
–
–
8 163
8 163
190
118
(60)
27 555 649
320 830
28
18 532
650
352
1 722
(1 035)
95
7
36 469
56 170
3 561
–
223
2 000
(231)
24
–
–
(13)
–
–
9 896
9 896
(231)
24
(48)
to
Rm
183
(9)
49
47
2
(11)
41
41
Total
equity
Rm
55 980
1 111
(380)
(5 200)
8 788
8 210
190
(9)
118
279
–
(343)
(2)
59 954
650
2 000
(377)
(78)
(4 261)
9 484
9 937
(231)
(13)
24
(233)
–
360
(10)
–
Balance at 31 December 2014
Shares issued
Preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Profit attributable to ordinary and preference
equity holders
Exchange differences on translating foreign
operations
Fair-value adjustments on available-for-sale
assets
Gains on property revaluations
Remeasurements on long-term employee benefit
assets
Transfer (from)/to reserves
Share-based payments reserve movement
Other movements
Balance at 31 December 2015
Shares issued
Additional tier 1 capital instruments issued
Preference share dividend
Additional tier 1 capital instruments interest paid
Dividend to shareholders
Total comprehensive income for the year
Profit attributable to ordinary and preference
equity holders
Exchange differences on translating foreign
operations
Fair-value adjustments on available-for-sale
assets
Gains on property revaluations
Remeasurements on long-term employee benefit
assets
Transfer (from)/to reserves
Share-based payments reserve movement
Regulatory risk reserve provision
Other movements
Balance at 31 December 2016
27 876 479
28
19 182
121
1 698
(6)
41 548
61 908
3 561
2 000
253
67 722
Rm
16
(9)
(13)
(371)
(5 200)
8 440
277
222
(2)
(377)
(78)
(4 250)
9 663
(233)
122
(1)
1 111
(371)
(5 200)
8 739
190
(9)
118
277
–
(343)
(2)
650
–
(377)
(78)
(4 250)
9 443
(231)
(13)
24
(233)
–
360
(10)
–
(177)
(343)
15
(94)
360
(769)
20
(10)
1
106
¹ This represents the cumulative foreign exchange differences that arise on the translation of an entity with a different functional currency compared with the
presentation currency of the parent company. The cumulative reserve relating to a subsidiary, 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.
² This represents the cumulative amounts that have been recognised on the revaluation of group properties net of deferred taxation. When the property is disposed
of, the cumulative revaluation surplus is transferred directly to retained income.
³ All share-based payment expenses are recognised in the statement of comprehensive income, with the corresponding amount recognised in share-based payment
reserves. Any excess tax benefit over the relative tax on the share-based payments expense is recognised directly in this reserve. On the expiry or exercise of a
share-based instrument the cumulative amount recognised in this respect is transferred directly to other distributable reserves. The negative share-based payment
reserve arises from the grants paid by Nedbank 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.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves to comply with
various banking regulations.
⁵ This comprises all fair-value adjustments, net of the related tax on all financial assets that have been classified as available for sale. On the disposal or impairment
of available-for-sale financial assets the cumulative gains and the associated tax recognised on these instruments are recognised in profit and loss for the period
and are not included in the determination of headline earnings per share.
⁶ Represents the accumulated profits after distributions to shareholders and appropriation of retained earnings to other non-distributable earnings.
All movements are reflected net of taxation.
24
Nedbank Limited – Annual Report 2016
Reserves
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
Additional
tier 1 capital
instruments
Non-
controlling
interest
attributable
to
ordinary
shareholders
Rm
Total
equity
Rm
(515)
80
16
33 380
52 236
3 561
183
55 980
190
118
–
–
(9)
(371)
(5 200)
8 440
1 111
(371)
(5 200)
8 739
8 163
8 163
–
–
(9)
277
222
(2)
190
(9)
118
277
–
(343)
(2)
(177)
(343)
15
(9)
49
47
2
28
352
1 722
(1 035)
95
7
36 469
56 170
3 561
–
223
Number of
Ordinary
share
translation
revaluation
ordinary
share capital
premium
reserve¹
Ordinary
Foreign
currency
shares
27 241 024
314 625
Rm
27
1
Rm
17 422
1 110
Property
reserve²
Rm
1 664
27 555 649
320 830
18 532
650
Rm
162
190
(231)
118
(60)
24
(48)
Balance at 31 December 2014
Shares issued
Preference share dividend
Dividend to shareholders
Total comprehensive income for the year
Profit attributable to ordinary and preference
Exchange differences on translating foreign
Fair-value adjustments on available-for-sale
equity holders
operations
assets
assets
Gains on property revaluations
Remeasurements on long-term employee benefit
Transfer (from)/to reserves
Share-based payments reserve movement
Other movements
Balance at 31 December 2015
Shares issued
Additional tier 1 capital instruments issued
Preference share dividend
Additional tier 1 capital instruments interest paid
Dividend to shareholders
Total comprehensive income for the year
Profit attributable to ordinary and preference
Exchange differences on translating foreign
Fair-value adjustments on available-for-sale
Gains on property revaluations
Remeasurements on long-term employee benefit
equity holders
operations
assets
assets
Transfer (from)/to reserves
Share-based payments reserve movement
Regulatory risk reserve provision
Other movements
Balance at 31 December 2016
27 876 479
28
19 182
121
1 698
¹ This represents the cumulative foreign exchange differences that arise on the translation of an entity with a different functional currency compared with the
presentation currency of the parent company. The cumulative reserve relating to a subsidiary, 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.
² This represents the cumulative amounts that have been recognised on the revaluation of group properties net of deferred taxation. When the property is disposed
of, the cumulative revaluation surplus is transferred directly to retained income.
³ All share-based payment expenses are recognised in the statement of comprehensive income, with the corresponding amount recognised in share-based payment
reserves. Any excess tax benefit over the relative tax on the share-based payments expense is recognised directly in this reserve. On the expiry or exercise of a
share-based instrument the cumulative amount recognised in this respect is transferred directly to other distributable reserves. The negative share-based payment
reserve arises from the grants paid by Nedbank 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.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves to comply with
various banking regulations.
⁵ This comprises all fair-value adjustments, net of the related tax on all financial assets that have been classified as available for sale. On the disposal or impairment
of available-for-sale financial assets the cumulative gains and the associated tax recognised on these instruments are recognised in profit and loss for the period
and are not included in the determination of headline earnings per share.
⁶ Represents the accumulated profits after distributions to shareholders and appropriation of retained earnings to other non-distributable earnings.
All movements are reflected net of taxation.
(231)
24
–
–
(13)
(13)
(94)
360
(769)
20
(10)
1
106
1 111
(380)
(5 200)
8 788
8 210
190
(9)
118
279
–
(343)
(2)
59 954
650
2 000
(377)
(78)
(4 261)
9 484
9 937
(231)
(13)
24
(233)
–
360
(10)
–
2 000
–
–
(11)
41
41
650
–
(377)
(78)
(4 250)
9 443
(377)
(78)
(4 250)
9 663
9 896
9 896
(231)
(13)
24
(233)
–
360
(10)
–
(233)
122
(1)
(6)
41 548
61 908
3 561
2 000
253
67 722
Nedbank Limited – Annual Report 2016
25
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 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 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 from by financing activities
Net proceeds from issue of ordinary shares
Issue of additional tier 1 capital instruments
Issue of long-term debt instruments
Redemption of long-term debt instruments
Dividends paid to ordinary shareholders
Preference share dividends paid
Additional tier 1 capital instruments interest paid
Effects of exchange rate changes on opening cash and cash equivalents (excluding
foreign borrowings)
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year¹
Cash and cash equivalents at the end of the year¹
¹ Including mandatory reserve deposits with central banks.
Notes
M1
M2
M3
M4
M5
M6
2016
Rm
21 707
89 203
2015
Rm
19 257
72 602
(68 662)
(54 509)
9
1 157
30
1 134
(14 185)
(9 508)
(38 057)
(102 943)
23 872
93 435
7 522
(4 020)
3 502
(5 265)
9 749
(3 771)
5 978
(2 070)
(3 776)
(2 604)
65
11
(1 403)
208
(818)
448
5 030
650
2 000
13 587
(6 502)
(4 250)
(377)
(78)
772
4 039
34 341
C6
38 380
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
26
Nedbank Limited – Annual Report 2016
Notes to the consolidated financial statements
for the year ended 31 December
SECTION A: ACCOUNTING POLICIES
A1
Principal accounting policies
A1.1
The group's principal accounting policies in preparing the consolidated financial statements of Nedbank Ltd are disclosed in the
individual sections to the financial statements. This section details the basis of preparation and key accounting policy elections.
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 2016, did not have a significant impact on the basis of
preparation. The amendments to standards, not yet effective as at 1 January 2016, except IFRS 9, IFRS 15 and IFRS 16, will
not have a significant impact on implementation. 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 IFRS as issued by the IASB and IFRIC, 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, 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 Campus, 135 Rivonia Road, Sandown, 2196, Johannesburg.
A1.2
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
Standard (IAS) 16 permits the
use of the cost or fair-value
model for the subsequent
measurement of property and
equipment.
■ 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.
Note/
Section
G2
Investment
in venture
capital
divisions
Financial
instruments
■ 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.
■ 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.
■ IAS 39 permits trade date or
settlement date accounting for
the regular way purchase or
sale of financial assets.
Investments
in subsidiar-
ies, associate
companies
and joint
arrange-
ments
■ 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.
■ In venture capital divisions the group has
F2
elected to carry associate and joint-venture
entities at fair value through profit and loss
under IAS 39.
■ 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.
I
■ Regular-way purchases or sales of financial
assets are recognised and derecognised using
trade date accounting.
■ The group has elected to recognise these
F2
investments at cost less impairments in the
separate financial statements.
Nedbank Limited – Annual Report 2016
27
A2
Key assumptions concerning the future and key sources of estimation
The group’s key accounting policy elections are set out in note A1.2 of the consolidated financial statements. Detailed
accounting policies are disclosed in the notes to the consolidated financial statements. Certain of these policies, as well
as estimates made by management, are considered to be important to an understanding of the group’s financial
condition since they require management to make difficult, complex or subjective judgements and estimates, some of
which may relate to matters that are inherently uncertain. Further information on accounting policies that include
estimates that are particularly sensitive in terms of judgements and the extent to which estimates are used are provided
within the notes to the consolidated financial statements. Other accounting policies involve significant amounts of
judgements and estimates, but the total amounts involved are not significant to the financial statements.
Management has agreed the accounting policies and critical accounting estimates with the board and Nedbank Group
Audit Committee.
A3
Standards issued but not yet effective
The following standards are issued by the IASB, but are not yet effective for the year ended 31 December 2016:
■ IFRS 9: Financial Instruments.
■ IFRS 15: Revenue from Contracts with Customers.
■ IFRS 16: Leases.
The new standards are each addressed in the relevant note in the group’s financial statements.
It is expected that other amendments, as issued by the IASB, will not have a material effect on the group’s
financial statements.
28
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
SECTION B: SEGMENTAL AND PERFORMANCE-RELATED INFORMATION
Segmental reporting
B1
Accounting policy
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 components 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 segments identified are complemented by Centre, which provides support in the areas of finance, human resources,
governance and compliance, risk management and information technology. Additional information relating to 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.
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 Group Ltd's case is the Group Executive Committee. The measure of segment profit is headline
earnings.
DESCRIPTION OF SEGMENTS
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 CIB 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 CIB'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 insurance, asset management and wealth management solutions to a wide spectrum of clients,
ranging from entry-level clients to high-net-worth individuals. Nedbank Wealth has operations in SA, London, Isle of Man,
Jersey, Guernsey and the United Arab Emirates.
NEDBANK REST OF AFRICA
Nedbank 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, Mozambique and
Zimbabwe. The division also holds the 21,2% investment in ETI, manages the Ecobank–Nedbank alliance and facilitates
investments in other countries in Africa.
CENTRE
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. Centre
also includes Group Balance Sheet Management, which is responsible for capital management, funding and liquidity risk
management, the management of banking-book interest rate risk, margin management and strategic portfolio tilt.
Nedbank Limited – Annual Report 2016
29
B1
Segmental reporting
(continued)
Nedbank Ltd
Fellow subsidiaries
Nedbank Corporate and
Investment Banking
Nedbank Retail and
Business Banking
Nedbank Wealth
Rest of Africa
Centre¹
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
(65 961)
(65 961)
(64 993)
(64 993)
(18 797)
368
(17 815)
(28 744)
(5)
(13 989)
173
(11 223)
(40 908)
(14)
(6 704)
(16 461)
411
(361)
(15 152)
(27 694)
(4 731)
(15 536)
460
(327)
(14 825)
(30 034)
22 404
4 608
17 796
17 514
35 310
23 459
668
11 183
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
59 954
33 996
708 036
13 770
44 977
–
860 733
67 722
13 469
750 319
16 489
52 062
–
900 061
(1 908)
(300)
(1 608)
(4 142)
(5 750)
(3 083)
(117)
(2 550)
34 341
60 078
30 948
42 733
666 807
25 826
–
860 733
38 380
68 218
18 044
50 687
691 925
32 807
–
900 061
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
Intergroup assets
Total assets
Equity and liabilities
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
Intergroup liabilities
Total equity and liabilities
Statement of comprehensive income (Rm)
Net interest income/(loss)
Impairments charge on loans and advances
Income/(Loss) from lending activities
Non-interest revenue
Operating income/(loss)
Total operating expenses
Indirect taxation
Profit/(Loss) from operations⁴
Share of (losses)/profits of associate
companies and joint arrangements
Profit/(Loss) before direct taxation⁴
Direct taxation⁴
Profit/(Loss) after direct taxation⁴
Profit attributable to non-controlling
interest:
– Ordinary shareholders
– Preference shareholders
– Additional tier 1 capital instruments note
holders
Headline earnings/(loss)
Selected ratios
Average interest-earning banking assets
(Rm)³
Return on total assets (%)² ³
Return on ordinary shareholders' equity (%)³
Net interest income to average interest-
earning banking assets (%)³
Non-interest revenue to total income (%)
Non-interest revenue to total operating
expenses (%)
Credit loss ratio – banking advances (%)³
Efficiency ratio (%)
Effective taxation rate (%)
Contribution to group economic profit (Rm)³
Number of employees (permanent staff)³
¹
²
³ This metric has not been audited by the group's external auditors.
⁴ These items are presented on a headline earnings basis and therefore exclude the impact of non-trading and capital items.
(1 481)
(181)
(1 300)
(4 234)
(5 534)
(2 651)
(115)
(2 768)
Includes all group eliminations.
Includes the elimination of intercluster balances.
76,6
0,67
57,6
24,6
1 552
29 378
74,7
0,78
58,8
25,6
1 156
29 477
85
(2 465)
(657)
(1 808)
(20)
13 512
3 328
10 184
(872)
(3 640)
(690)
(2 950)
(1)
11 182
2 860
8 322
718 901
1,20
17,3
674 935
1,05
15,4
1 091
26 952
1 446
27 813
(78)
(1 322)
–
10 143
–
8 275
(47)
(361)
(23)
(371)
3,32
43,9
3,41
44,1
(56 191)
(49 145)
(2 556)
47
–
41
–
15 306
46 625
17 582
27 775
370 199
13 993
12 910
35 005
30 102
24 950
355 784
11 816
491 480
470 567
304 842
292 560
62 042
61 322
28 462
13 239
343 153
25 128
1 378
80 120
491 480
23 096
32 987
346 868
18 176
1 563
47 877
470 567
7 291
1 095
6 196
7 453
13 649
5 751
96
7 802
(20)
7 782
1 769
6 013
6 781
1 188
5 593
6 508
12 101
5 105
78
6 918
(1)
6 917
1 702
5 215
(1)
7
89
63
80
95
6 014
5 208
4 960
4 460
1 192
1 134
(287)
691
369 525
1,28
21,10
342 898
1,24
22,60
2,0
50,5
129,60
0,34
39,0
23
1 970
2 729
2,0
49,0
127,50
0,40
38,4
25
2 205
2 728
3 765
3 161
3 839
279 929
5 631
289 882
6 530
4 665
26 254
26 924
272 274
248 135
304 842
292 560
3 796
2 518
17 347
3 261
14 086
11 724
25 810
18 433
359
7 018
7 018
1 978
5 040
285 393
1,68
18,90
6,1
40,3
63,60
1,12
63,4
28
1 230
21 189
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
274 162
1,57
16,60
5,8
40,7
64,30
1,14
63,4
28
960
20 921
994
15 604
9
28 577
16 858
3 387
4
33 461
20 931
4 259
62 042
974
22
952
3 410
4 362
2 704
108
1 550
1 550
358
1 192
45 209
1,93
35,20
2,2
77,8
126,10
0,08
61,7
23
711
2 232
1 774
15 161
5
28 206
16 176
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
41,50
1,9
82,4
131,60
0,15
62,6
24
778
2 107
7 166
2 580
44
488
19 582
5 795
534
36 189
7 942
16
27 003
1 214
14
36 189
1 013
177
836
877
1 713
1 887
32
(206)
(85)
(291)
(93)
(198)
24 305
(0,86)
(3,60)
4,2
46,4
46,50
0,98
104,5
32
(1 413)
2 386
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
20 934
2,31
10,20
3,5
52,5
53,70
1,25
62,8
(12)
(193)
1 812
17 853
19 870
(2)
22 785
(1 163)
17 325
(5 199)
71 469
15 666
37
85 651
6 328
48 166
(84 379)
71 469
(199)
(1)
(198)
39
(159)
(409)
332
(82)
(82)
(27)
(55)
281
78
(414)
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)
50 660
46 474
(933)
3 865
(1 225)
3 744
During 2015 the Nedbank Retail and Nedbank Business Banking Clusters were merged to form the Nedbank Retail and Business
Banking (RBB) Cluster. This had the consequential effect that average interest-earning banking assets for Nedbank RBB
(previously R325 997m asset) and Centre (previously R5 361m liability) and net interest income to average interest-earning
banking assets for Nedbank RBB (previously 4,89%) have been restated.
Depreciation costs of R1 181m (2015: R969m) and amortisation costs of R784m (2015: R705m) for property, equipment,
computer software and capitalised development are charged on an activity-justified transfer pricing methodology by the
segment owning the assets to the segment utilising the benefits thereof.
30
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
900 061
860 733
(65 961)
(64 993)
B1
Segmental reporting
(continued)
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
Intergroup assets
Total assets
Equity and liabilities
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
Intergroup liabilities
Total equity and liabilities
Statement of comprehensive income (Rm)
Net interest income/(loss)
Impairments charge on loans and advances
Income/(Loss) from lending activities
Non-interest revenue
Operating income/(loss)
Total operating expenses
Indirect taxation
Profit/(Loss) from operations⁴
Share of (losses)/profits of associate
companies and joint arrangements
Profit/(Loss) before direct taxation⁴
Direct taxation⁴
Profit/(Loss) after direct taxation⁴
Profit attributable to non-controlling
interest:
– Ordinary shareholders
– Preference shareholders
holders
Headline earnings/(loss)
Selected ratios
– Additional tier 1 capital instruments note
Average interest-earning banking assets
(Rm)³
Return on total assets (%)² ³
Return on ordinary shareholders' equity (%)³
Net interest income to average interest-
earning banking assets (%)³
Non-interest revenue to total income (%)
Non-interest revenue to total operating
expenses (%)
Credit loss ratio – banking advances (%)³
Efficiency ratio (%)
Effective taxation rate (%)
38 380
68 218
18 044
50 687
691 925
32 807
–
67 722
13 469
750 319
16 489
52 062
–
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
(20)
13 512
3 328
10 184
41
–
–
1,20
17,3
3,41
44,1
76,6
0,67
57,6
24,6
34 341
60 078
30 948
42 733
666 807
25 826
–
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
47
–
–
1,05
15,4
3,32
43,9
74,7
0,78
58,8
25,6
(6 704)
(16 461)
411
(361)
(15 152)
(27 694)
(4 731)
(15 536)
460
(327)
(14 825)
(30 034)
(13 989)
(18 797)
173
(11 223)
(40 908)
(14)
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)
(1 908)
(300)
(1 608)
(4 142)
(5 750)
(3 083)
(117)
(2 550)
85
(2 465)
(657)
(1 808)
(47)
(361)
(78)
(1 322)
15 306
46 625
17 582
27 775
370 199
13 993
28 462
13 239
343 153
25 128
1 378
80 120
491 480
7 291
1 095
6 196
7 453
13 649
5 751
96
7 802
(20)
7 782
1 769
6 013
12 910
35 005
30 102
24 950
355 784
11 816
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
1,28
21,10
2,0
50,5
129,60
0,34
39,0
23
1 970
2 729
1,24
22,60
2,0
49,0
127,50
0,40
38,4
25
2 205
2 728
718 901
674 935
(56 191)
(49 145)
369 525
342 898
Contribution to group economic profit (Rm)³
Number of employees (permanent staff)³
1 552
29 378
1 156
29 477
1 446
27 813
1 091
26 952
¹
²
Includes all group eliminations.
Includes the elimination of intercluster balances.
³ This metric has not been audited by the group's external auditors.
⁴ These items are presented on a headline earnings basis and therefore exclude the impact of non-trading and capital items.
During 2015 the Nedbank Retail and Nedbank Business Banking Clusters were merged to form the Nedbank Retail and Business
Banking (RBB) Cluster. This had the consequential effect that average interest-earning banking assets for Nedbank RBB
(previously R325 997m asset) and Centre (previously R5 361m liability) and net interest income to average interest-earning
banking assets for Nedbank RBB (previously 4,89%) have been restated.
Depreciation costs of R1 181m (2015: R969m) and amortisation costs of R784m (2015: R705m) for property, equipment,
computer software and capitalised development are charged on an activity-justified transfer pricing methodology by the
segment owning the assets to the segment utilising the benefits thereof.
Nedbank Ltd
Fellow subsidiaries
Investment Banking
Nedbank Corporate and
Nedbank Retail and
Business Banking
Nedbank Wealth
Rest of Africa
Centre¹
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
900 061
860 733
(65 961)
(64 993)
491 480
470 567
289 882
6 530
4 665
304 842
3 765
3 161
994
15 604
9
28 577
16 858
1 774
15 161
5
28 206
16 176
3 839
279 929
5 631
292 560
62 042
61 322
26 254
26 924
272 274
3 796
2 518
304 842
17 347
3 261
14 086
11 724
25 810
18 433
359
7 018
7 018
1 978
5 040
248 135
3 686
6 816
6 999
292 560
15 955
3 212
12 743
10 972
23 715
17 077
302
6 336
6 336
1 781
4 555
3 387
4
33 461
20 931
4 259
62 042
974
22
952
3 410
4 362
2 704
108
1 550
1 550
358
1 192
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
7 166
2 580
44
488
19 582
5 795
534
36 189
7 942
16
27 003
1 214
14
36 189
1 013
177
836
877
1 713
1 887
32
(206)
(85)
(291)
(93)
(198)
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
10 143
8 275
(2 556)
6 014
5 208
4 960
4 460
1 192
1 134
(287)
691
(1)
7
89
63
80
95
17 853
19 870
(2)
22 785
(1 163)
17 325
(5 199)
71 469
15 666
37
85 651
6 328
48 166
(84 379)
71 469
(199)
(1)
(198)
39
(159)
(409)
332
(82)
(82)
(27)
(55)
281
78
(414)
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)
285 393
1,68
18,90
6,1
40,3
63,60
1,12
63,4
28
1 230
21 189
274 162
1,57
16,60
5,8
40,7
64,30
1,14
63,4
28
960
20 921
45 209
1,93
35,20
2,2
77,8
126,10
0,08
61,7
23
711
2 232
39 612
1,84
41,50
1,9
82,4
131,60
0,15
62,6
24
778
2 107
24 305
(0,86)
(3,60)
4,2
46,4
46,50
0,98
104,5
32
(1 413)
2 386
20 934
2,31
10,20
3,5
52,5
53,70
1,25
62,8
(12)
(193)
1 812
50 660
46 474
(933)
3 865
(1 225)
3 744
Nedbank Limited – Annual Report 2016
31
B2 Dividends
B2.1 Ordinary shares
2016
Final declared for 2015 – paid 2016
Interim declared for 2016
Ordinary dividends paid 2016
Final ordinary dividend declared for 2016
2015
Final declared for 2014 – paid 2015
Interim declared for 2015
Ordinary dividends paid 2015
Final ordinary dividend declared for 2014
¹ Total dividend declared for 2016: 8 578 cents per share.
² Total dividend declared for 2015: 16 331 cents per share.
Dividends declared
B2.2 Preference shares
2017
Millions of
shares
Cents per
shares
Rm
28
28
27
28
9 073
6 278¹
15 351
2 300¹
11 747
7 2582
19 005
9 0732
2 500
1 750
4 250
3 200
2 000
5 200
Number of
shares
Cents
per share
Amount
Rm
Nedbank – Final (dividend no 28) declared for 2016 – payable April 2017
358 277 491
43,98905
157,6
2016
Nedbank – Final (dividend no 26) declared for 2015 – paid April 2016
358 277 491
40,01711
Nedbank – Interim (dividend no 27) declared for 2016 – paid September 2016
358 277 491
42,75385
Total of dividends declared
Nedbank (MFC) – participating preference shares¹
Less: Dividends declared in respect of shares held by group entities
2015
Nedbank – Final (dividend no 24) declared for 2014 – paid March 2015
358 277 491
38,76140
Nedbank – Interim (dividend no 25) declared for 2015 – paid September 2015
358 277 491
38,22487
Total of dividends declared
Nedbank (MFC) – participating preference shares¹
¹ Profit share calculated semi-annually.
143,4
153,1
296,5
80,0
(15,9)
360,6
138,9
136,9
275,8
94,7
370,5
32
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
B3 Share capital
Accounting policy
Share capital
Ordinary share capital, preference share capital or any financial instrument issued by the group is classified as equity
when:
■ payment of cash, in the form of a dividend or redemption, is at the discretion of the group;
■ the instrument does not provide for the exchange of financial instruments under conditions that are potentially
unfavourable to the group;
■ settlement in the group’s own equity instruments is for a fixed number of equity instruments at a fixed price; and
■ the instrument represents a residual interest in the assets of the group after deducting all its liabilities.
Consideration paid or received for equity instruments is recognised directly in equity. Equity instruments are initially
measured at the proceeds received, less incremental directly attributable issue costs, net of any related income tax
benefits. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the group’s equity
instruments.
When the group issues a compound instrument, ie an instrument that contains a liability and an equity component, the
fair value of the liability component is calculated first and the equity component is treated as a residual. Transaction
costs that relate to the issue of a compound financial instrument are allocated to the liability and equity components of
the instrument in proportion to the allocation of proceeds.
Distributions to holders of equity instruments are recognised as distributions in the statement of changes in equity in the
period in which they are payable. Dividends for the year that are declared after the reporting date are disclosed in note
B3 to the financial statements.
Treasury shares
When the group acquires its own share capital, the amount of the consideration paid, including directly attributable
costs, net of any related tax benefit, is recognised as a change in equity. Shares repurchased by the issuing entity are
cancelled. Shares repurchased by group entities are classified as treasury shares and are held at cost. These shares are
treated as a deduction from the issued and weighted-average number of shares and the cost price of the shares is
presented as a deduction from total equity. The par value of the shares is presented as a deduction from ordinary share
capital and the remainder of the cost is presented as a deduction from ordinary share premium. Dividends received on
treasury shares are eliminated on consolidation.
B3.1 Ordinary share capital
Authorised
30 000 000 (2015: 30 000 000) ordinary shares of R1 each
Issued
27 876 479 (2015: 27 555 649) fully paid ordinary shares of R1 each
2016
Rm
2015
Rm
30
28
28
30
28
28
Subject to the restrictions imposed by the Companies Act, 71 of 2008, the unissued shares are under the control of the
directors until the forthcoming annual general meeting.
B3.2 Preference share capital and premium
Nedbank Ltd preference share capital and premium
Authorised
1 000 000 000 (2015: 1 000 000 000) non-redeemable non-cumulative non-participating
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 (2015: 358 277 491) non-redeemable non-cumulative non-participating 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.
2016
Rm
2015
Rm
1
¹
¹
¹
¹
1
¹
¹
¹
¹
3 561
3 561
3 561
3 561
Nedbank Limited – Annual Report 2016
33
B3 Share capital (continued)
B3.2 Preference share capital and premium (continued)
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 in the reduction of its share capital.
At every general meeting where the preference shareholder is entitled to vote, the voting rights are restricted to the holder’s
nominal value in proportion to the total nominal value of all shares issued by the company.
No shares in the capital of the company, in priority to the preference shares, can be created or issued without prior sanction
of the holders of preference shares by way of a resolution passed at a separate class meeting properly constituted in terms
of the provisions set out in the memorandum of incorporation.
B4 Additional tier 1 capital instruments
The group issued new-style (Basel III-compliant) additional tier 1 (AT 1) capital instrument as follows:
Instrument code
Date of issue
Call date
Instrument
terms
2016
Rm
2015
Rm
Subordinated
Callable notes (rand-
denominated)
NEDT1A
NEDT1B
20 May 2016
21 May 2021
25 November 2016
26 November 2021
3-month JIBAR
+ 7,00% per annum
3-month JIBAR
+ 6,25% per annum
1 500
500
2 000
–
The AT 1 notes represent perpetual, subordinated instruments, with no redemption date. The instruments are redeemable
subject to regulatory approval at the sole discretion of the issuer, Nedbank Ltd from the applicable call date and following a
regulatory event or following a tax event. The payment of interest is at the discretion of the issuer and interest payments are
non-cumulative. In addition, if certain conditions are reached, the regulator may prohibit Nedbank from making interest
payments.
34
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
B5 Net interest income
Accounting policy
Interest income and expense
Interest income and expense are recognised in profit or loss using the effective-interest method taking into account the
expected timing and amount of cashflows. The effective-interest method is a method of calculating the amortised cost
of a financial asset or financial liability (or group of financial assets or financial liabilities) and of allocating the interest
income or interest expense over the relevant period. Interest income and expense include the amortisation of any
discount or premium or other differences between the initial carrying amount of an interest-bearing financial instrument
and its amount at maturity calculated on an effective-interest-rate basis.
B5.1
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 C7.5)
Fair-value adjustments on hedging instruments (refer to note C7.5)
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 or loss
– Interest and similar income from financial instruments at fair value through profit or loss
B5.2 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 or loss
– Interest expense and similar charges from financial instruments at fair value through profit
or loss
2016
Rm
12 923
13 888
11 183
2 111
1 566
20 345
3 606
3 603
25
(22)
4 240
69 862
62 873
6 989
69 862
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
2016
Rm
2015
Rm
25 767
20 731
913
7 458
6 764
4 442
683
5 883
1 851
3 576
45 344
32 724
41 259
29 123
4 085
45 344
3 601
32 724
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 2016
35
B6 Non-interest revenue
Accounting policy
■ Commission and fee income
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.
Fees charged for servicing a loan are recognised in revenue as the service is provided, which in most instances
occurs monthly when the fees are levied.
■ Insurance income
Insurance income comprises premiums written on insurance contracts entered into during the year, with the earned
portion of premiums received, recognised as revenue. Premiums are earned from the date of attachment of risk, over
the indemnity period, based on the pattern of risks underwritten. Premiums are disclosed gross of commission
payable and reinsurance premiums. Claims incurred consist of claims and claims-handling expenses paid during the
financial year together for the movement in provision for outstanding claims. Outward reinsurance premiums are
accounted for in the same accounting period as premiums for the related direct insurance.
■ 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.
■ Other
Exchange and securities trading income, from investments and net gains on the sale of investment banking assets, is
recognised in profit or loss when the amount of revenue from the transaction can be measured reliably, it is probable
that the economic benefits of the transaction will flow to the group and the costs associated with the transaction or
service can be measured reliably.
Fair-value gains or losses on financial instruments at fair value through profit or loss, including derivatives, are
included in non-interest revenue. These fair-value gains or losses are determined after deducting the interest
component, which is recognised separately in interest income and expense. Gains or losses on derecognition of any
financial assets or financial liabilities are included in non-interest revenue.
Standards and interpretations issued and not yet effective
IFRS 15: Revenue from Contracts with Customers
IFRS 15 replaces all existing revenue requirements in IFRS and applies to all revenue arising from contracts with
customers, unless the contracts are in 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 customer. 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.
During the year, the group performed an assessment to determine the potential impact of the new standard on the
group’s statement of financial position and performance. Based on this assessment, the group does not expect the
impact of the new standard to be significant.
Key matters arising from the assessment relate to the determination of when performance obligations are satisfied.
36
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
B6 Non-interest revenue (continued)
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 B6.1)
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 income
Interest and distribution
Investment income
Dividends received from unlisted investments
Long-term-asset sales
Net sundry income
Rents received
Rental income from properties in possession
Other sundry income
B6.1 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
2016
Rm
2015
Rm
14 587
13 404
591
936
657
387
1 265
182
3 452
3 865
3 252
250
21
(52)
73
3 321
1 356
1 933
(15)
47
869
(41)
435
179
94
202
20
9
11
293
10
1
282
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
19 361
17 514
(1 364)
1 385
21
1 617
(1 629)
(12)
Nedbank Limited – Annual Report 2016
37
B7
Total operating expenses
Staff costs
Remuneration and other staff costs
Short-term incentives
Long-term employee benefits (note H1.1.2)¹
Share-based payments expense – employees
BBBEE transaction expenses
BBBEE 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
2016
Rm
2015
Rm
13 819
11 098
2 234
(61)
548
12
12
3 751
599
784
393
196
1 779
754
3
751
2 086
368
815
903
1 618
2 421
125
104
21
2 296
525
211
5
309
297
12 893
10 508
1 953
19
413
20
16
4
3 312
428
705
320
65
1 794
773
3
770
1 858
316
738
804
1 538
2 323
153
106
1
46
2 170
547
222
8
317
195
Certain expenses incurred by the company on behalf of subsidiary companies are recovered from subsidiary companies.
¹
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 H1.
25 283
23 459
38
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
B8 Taxation
Accounting policy
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).
Deferred taxation
Deferred taxation is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Temporary differences are
differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective
taxation bases. The amount of deferred taxation provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, and is measured at the taxation rates (enacted or substantively enacted
at the reporting date) that are expected to be applied to the temporary differences when they reverse.
Deferred taxation is recognised in profit or loss for the period, except to the extent that it relates to a transaction that is
recognised directly in equity or in OCI, or a business combination that is accounted for as an acquisition. The effect on
deferred taxation of any changes in taxation rates is recognised in profit or loss for the period, except to the extent that
it relates to items previously charged or credited directly to equity.
Deferred taxation liabilities are recognised for all taxable 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 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.
Key assumptions concerning the future and key sources of estimation
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.
B8.1
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, 89 of 1991.
B8.2 Direct taxation
B8.2.1 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 – current taxation
Prior-year (underprovision)/overprovision – deferred taxation
Total taxation on income
Taxation on non-trading and capital items
Nedbank Limited – Annual Report 2016
2016
Rm
627
183
810
3 471
10
(293)
157
3 345
(16)
(1)
3 328
(42)
3 286
2015
Rm
492
176
668
2 851
(29)
24
10
2 856
(1)
5
2 860
(32)
2 828
39
B8 Taxation (continued)
B8.2 Direct taxation (continued)
B8.2.2 Taxation rate reconciliation
Standard rate of SA normal taxation
Non-taxable dividend income
Other
Effective taxation rate
B8.2.3 Income tax recognised in other comprehensive income
2016
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
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
2016
%
2015
%
28,0
(2,7)
(0,7)
24,6
28,0
(2,5)
0,1
25,6
Gross
Taxation
Net of
taxation
(231)
(17)
(322)
35
190
(9)
388
162
4
89
(11)
(109)
(44)
(231)
(13)
(233)
24
190
(9)
279
118
B8.2.4 Future taxation relief
The group has estimated taxation losses of R239m (2015: R203m) that can be set off against future taxable income, of which
R4m (2015: R91m) has been applied to the deferred taxation balance.
B8.3 Deferred taxation
B8.3.1 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
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
2016
%
2015
%
67
326
(20)
(3)
27
(32)
165
193
32
(36)
112
(239)
266
165
22
(3)
(3)
9
2
17
(120)
67
40
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
B8.3 Deferred taxation (continued)
B8.3.1 Reconciliation of deferred taxation balance (continued)
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
B8.3.2 Analysis of deferred taxation
Deferred taxation assets
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
2016
%
2015
%
763
41
29
(3)
15
(9)
(404)
391
2016
Rm
(499)
271
(522)
1 453
136
(480)
(94)
1
266
73
(3)
202
119
391
287
22
(62)
(20)
83
(4)
150
40
(23)
(188)
(4)
50
154
300
763
2015
Rm
35
14
33
(41)
26
67
223
479
(238)
549
50
(1 260)
249
591
120
763
Nedbank Limited – Annual Report 2016
41
B9 Non-trading and capital items
ACCOUNTING POLICY
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.
Rm
Profit attributable to ordinary and preference equity holders
Non-trading and capital items
IAS 16: Loss on disposal of property and equipment
IAS 36: Impairment of property and equipment
IAS 38: Impairment of intangible assets
IAS 39: Loss on sale of available-for-sale financial assets
IAS 39: Profit on sale of available-for-sale financial assets
IAS 40: Loss on disposal of investment properties
Headline earnings
2016
2015
Gross
Net of
taxation
Gross
289
44
145
94
6
9 896
247
44
103
94
6
10 143
144
35
8
110
(9)
Net of
taxation
8 163
112
35
7
79
(9)
8 275
42
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
SECTION C: CORE BANKING ASSETS
ACCOUNTING POLICY
Refer to Section I: Financial instruments for the group’s accounting policies regarding financial assets and liabilities.
C1
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 C2 ‘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 C2.2. Portfolio impairments are recognised against loans and
advances classified as ‘neither past due nor impaired’ or ‘past due but not impaired’.
C1.1 Categories of loans and advances
Mortgage loans
Home loans
Commercial mortgages
Net finance lease and instalment debtors (note C1.4)
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
Impairment of loans and advances (note C2)
Comprises:
Loans and advances to clients
Loans and advances to banks
¹
Represents clients’ indebtedness for acceptances, structured financing and other loans.
2016
Rm
2015
Rm
286 190
135 495
150 695
102 845
131 973
(29 128)
14 818
299 886
223
15 357
117 959
17 941
100 018
21 913
103 720
26 684
229
76 807
20 050
5 010
15 654
703 739
(11 814)
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)
691 925
666 807
676 389
27 350
703 739
651 555
26 312
677 867
Nedbank Limited – Annual Report 2016
43
Loans and advances (continued)
C1
C1.2 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
C1.3 Geographical analysis
SA
Rest of Africa
Europe
Asia
United States of America
Other
Rm
Gross
C1.4 Net finance lease and
instalment debtors
2016
Unearned
finance
charges
Net
Gross
2016
Rm
2015
Rm
253 000
185 276
27 350
36 361
8 263
39 400
8 665
29 993
22 326
24 386
2 969
65 750
230 688
181 083
26 312
42 726
9 119
25 649
20 601
28 208
32 397
5 091
17 377
58 616
703 739
677 867
657 509
636 467
17 484
21 706
3 856
412
2 772
17 667
18 504
4 294
722
213
703 739
677 867
2015
Unearned
finance
charges
Net
No later than one year
30 611
(6 707)
23 904
28 525
(5 851)
22 674
Later than one year and no later
than five years
Later than five years
89 702
11 660
131 973
(19 822)
(2 599)
69 880
9 061
83 993
10 550
(17 510)
(2 207)
(29 128)
102 845
123 068
(25 568)
66 483
8 343
97 500
44
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2016
2015
2016
2015
2016
2015
2016
2015
Total
Neither past due
nor impaired
Past due but not
individually impaired
Defaulted
C1.5 Classification of loans
and advances
Mortgage loans
Net finance lease and instalment
debtors
Credit cards
286 190
267 806
267 469
250 241
10 133
10 442
8 588
7 123
102 845
97 500
93 955
89 669
14 818
14 025
12 370
11 807
6 010
1 119
5 263
1 139
2 880
1 329
223
642
2 568
1 079
354
625
641
1 660
2 757
3 365
Properties in possession
223
354
Overdrafts
Term loans
Overnight loans
15 357
13 481
14 068
12 215
117 959
107 636
113 435
102 611
647
1 767
21 913
27 527
21 913
27 527
Other loans to clients
103 720
103 376
100 935
101 834
154
281
2 631
1 261
Preference shares and debentures
20 050
20 660
20 050
20 660
Factoring accounts
5 010
5 329
4 762
5 102
220
160
28
67
Deposits placed under reverse
repurchase agreements
Trade, other bills and bankers’
acceptances
15 654
20 173
15 654
20 173
–
–
703 739
677 867
664 611
641 839
20 050
19 586
19 078
16 442
Loans and advances defaulted – not
impaired
Loans and advances defaulted –
impaired
569
403
18 509
16 039
19 078
16 442
Nedbank Limited – Annual Report 2016
45
Rm
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total
< 1 month
> 1 month
< 3 months
> 3 months
< 6 months
> 6 months
< 12 months
> 12 months
Loans and advances (continued)
C1
C1.6 Age analysis of loans and advances
Neither past due nor impaired
Mortgage loans
Net finance lease and instalment debtors
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances
Past due but not individually impaired
Mortgage loans
Net finance lease and instalment debtors
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Factoring accounts
Subtotal
Defaulted
Mortgage loans
Net finance lease and instalment debtors
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients
Factoring accounts
Total loans and advances
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
–
20 050
10 133
6 010
1 119
647
1 767
–
154
220
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
–
19 586
10 442
5 263
1 139
641
1 660
–
281
160
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
12 562
7 257
2 825
767
609
740
147
217
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
12 035
7 040
2 580
783
570
627
275
160
677 173
653 874
7 469
7 507
44
–
–
–
–
684 661
19 078
661 425
16 442
8 588
2 880
1 329
223
642
2 757
2 631
28
7 123
2 568
1 079
354
625
3 365
1 261
67
703 739
677 867
7 469
2 865
3 183
352
35
1 025
6
3
7 507
3 369
2 677
356
66
1 033
6
44
33
6
5
19
11
2
3
2
1
19
46
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total
< 1 month
> 1 month
< 3 months
> 3 months
< 6 months
> 6 months
< 12 months
> 12 months
C1
Loans and advances (continued)
C1.6 Age analysis of loans and advances
Neither past due nor impaired
Mortgage loans
Net finance lease and instalment debtors
Preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances
Past due but not individually impaired
Net finance lease and instalment debtors
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Mortgage loans
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Factoring accounts
Subtotal
Defaulted
Mortgage loans
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients
Factoring accounts
Total loans and advances
Net finance lease and instalment debtors
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
12 562
7 257
2 825
767
609
740
147
217
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
12 035
7 040
2 580
783
570
627
275
160
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
–
20 050
10 133
6 010
1 119
647
1 767
–
154
220
8 588
2 880
1 329
223
642
2 757
2 631
28
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
–
19 586
10 442
5 263
1 139
641
1 660
–
281
160
7 123
2 568
1 079
354
625
3 365
1 261
67
703 739
677 867
7 469
2 865
3 183
352
35
1 025
6
3
7 507
3 369
2 677
356
66
1 033
6
684 661
19 078
661 425
16 442
677 173
653 874
7 469
7 507
19
11
2
3
2
1
19
44
33
6
5
44
–
–
–
–
Nedbank Limited – Annual Report 2016
47
Rm
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total
NGR 1-12
NGR 13-20
NGR 21-25
NP1-NP3
Unrated¹
Loans and advances (continued)
C1
C1.7 Credit quality of loans and advances
Neither past due nor impaired
Mortgage loans
Net finance lease and instalment debtors
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances
Past due but not individually impaired
Mortgage loans¹
Net finance lease and instalment debtors¹
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients¹
Factoring accounts
Defaulted
Mortgage loans¹
Net finance lease and instalment debtors¹
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients¹
Factoring accounts
Total loans and advances
¹
Loans and advances in this category do not have assigned AIRB ratings.
314 993
105 873
3 280
1 834
5 113
82 148
18 467
72 662
14 538
609
10 469
72
62
9
1
–
276 494
72 397
4 157
1 134
3 305
69 878
21 088
69 875
15 084
1 026
18 550
9
9
–
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
–
20 050
10 133
6 010
1 119
647
1 767
–
154
220
19 078
8 588
2 880
1 329
223
642
2 757
2 631
28
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
–
19 586
10 442
5 263
1 139
641
1 660
–
281
160
16 442
7 123
2 568
1 079
354
625
3 365
1 261
67
315 325
152 707
81 091
8 263
8 349
23 164
3 169
26 583
2 661
4 153
5 185
2 677
2 029
278
147
56
167
–
331 665
165 776
76 677
8 958
8 323
26 718
5 700
30 875
2 939
4 076
1 623
2 729
1 609
703
246
45
119
7
–
27 494
7 256
9 038
2 266
255
7 708
277
694
17 087
8 002
5 624
945
591
1 564
141
220
–
27 395
10 370
8 285
1 715
282
5 636
739
368
16 555
8 704
4 461
875
596
1 519
240
160
–
–
–
91
9
64
18
85
7
60
18
18 281
8 120
2 842
1 329
619
2 737
2 606
28
15 528
6 689
2 534
1 079
618
3 357
1 184
67
6 799
1 633
546
7
351
415
996
2 851
123
31
44
35
13
797
468
38
223
23
20
25
6 285
1 698
550
305
379
716
2 637
208
113
39
22
34
914
434
34
354
7
8
77
703 739
677 867
315 065
276 503
318 002
334 394
44 581
43 950
18 372
15 613
7 719
7 407
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-sized 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.
48
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Total
NGR 1-12
NGR 13-20
NGR 21-25
NP1-NP3
Unrated¹
315 325
152 707
81 091
8 263
8 349
23 164
3 169
26 583
2 661
4 153
5 185
2 677
2 029
278
147
56
167
–
331 665
165 776
76 677
8 958
8 323
26 718
5 700
30 875
2 939
4 076
1 623
2 729
1 609
703
246
45
119
7
–
27 494
7 256
9 038
2 266
255
7 708
277
694
17 087
8 002
5 624
945
591
1 564
141
220
–
27 395
10 370
8 285
1 715
282
5 636
739
368
16 555
8 704
4 461
875
596
1 519
240
160
–
–
–
91
9
64
18
85
7
60
18
18 281
8 120
2 842
1 329
619
2 737
2 606
28
15 528
6 689
2 534
1 079
618
3 357
1 184
67
6 799
1 633
546
7
351
415
996
2 851
123
31
44
35
13
797
468
38
223
23
20
25
6 285
1 698
550
305
379
716
2 637
208
113
39
22
34
914
434
34
354
7
8
77
703 739
677 867
315 065
276 503
318 002
334 394
44 581
43 950
18 372
15 613
7 719
7 407
C1
Loans and advances (continued)
C1.7 Credit quality of loans and advances
Neither past due nor impaired
Mortgage loans
Net finance lease and instalment debtors
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients
Preference shares and debentures
Factoring accounts
Deposits placed under reverse repurchase agreements
Trade, other bills and bankers’ acceptances
Past due but not individually impaired
Mortgage loans¹
Net finance lease and instalment debtors¹
Credit cards
Overdrafts
Term loans
Overnight loans
Other loans to clients¹
Factoring accounts
Defaulted
Mortgage loans¹
Credit cards
Properties in possession
Overdrafts
Term loans
Other loans to clients¹
Factoring accounts
Total loans and advances
Net finance lease and instalment debtors¹
314 993
105 873
3 280
1 834
5 113
82 148
18 467
72 662
14 538
609
10 469
72
62
9
1
–
276 494
72 397
4 157
1 134
3 305
69 878
21 088
69 875
15 084
1 026
18 550
9
9
–
664 611
267 469
93 955
12 370
14 068
113 435
21 913
100 935
20 050
4 762
15 654
–
20 050
10 133
6 010
1 119
647
1 767
–
154
220
19 078
8 588
2 880
1 329
223
642
2 757
2 631
28
641 839
250 241
89 669
11 807
12 215
102 611
27 527
101 834
20 660
5 102
20 173
–
19 586
10 442
5 263
1 139
641
1 660
–
281
160
16 442
7 123
2 568
1 079
354
625
3 365
1 261
67
¹
Loans and advances in this category do not have assigned AIRB ratings.
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-sized 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 2016
49
C2
Impairment of loans and advances
Key assumptions concerning the future and key sources of estimation
Allowances for loan impairment and other credit risk provisions
Allowances for loan impairment represent management’s estimate of the losses incurred in the loan portfolios at the
reporting date.
The group assesses its loan portfolios for impairment at each reporting date. In determining whether an impairment
loss should be recorded in the statement of comprehensive income, the group makes judgements as to whether there is
observable data indicating a measurable decrease in the estimated future cashflows from a portfolio of loans before
the decrease can be allocated to an individual loan in that portfolio. Estimates are made of the duration between the
occurrence of a loss event and the identification of a loss on an individual basis. The impairment for performing loans is
calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry-specific economic
conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These include
early arrears and other indicators of potential default, such as changes in macroeconomic conditions and legislation
affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to the
estimated-loss emergence period.
Within the Nedbank RBB, 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 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.
Total
impairments
Specific
impairment
Portfolio
impairment
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
C2.1
Impairment of loans and advances
Balance at the beginning of the year
Impairments charge
Statement of comprehensive income charge net of
recoveries
Loans and advances
Advances designated as at fair value through profit or
loss (see note I4.1)
Recoveries
Amounts written off against the impairment/Other
transfers
11 059
10 948
5 411
5 742
4 254
4 254
–
1 157
4 608
4 606
2
1 134
6 415
5 372
4 215
4 215
6 758
5 304
4 170
4 168
2
1 157
1 134
4 644
39
39
39
4 190
438
438
438
(4 656)
(5 630)
(4 650)
(5 647)
(6)
17
Impairment of loans and advances
11 814
11 060
7 137
6 415
4 677
4 645
50
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C2.2 Impairments of loans and advances by
classification
Total impairment – 2016
Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Trade, other bills and bankers’ acceptances
Balance
at the
beginning
of the year
Rm
Impairment
charge/
(release)
Rm
Amounts
written off
against the
impairment/
Other
transfers
Rm
2 125
957
22
1 178
478
4 059
2 239
1
242
124
(40)
984
215
2 482
1 362
42
(380)
(115)
51
(854)
(138)
(1 942)
(1 288)
10
Total
Rm
1 987
966
33
1 308
555
4 599
2 313
52
1
Impairment of loans and advances
11 059
5 411
(4 656)
11 814
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
Specific impairment – 2016
Home loans
Commercial mortgages
Properties in possession
Credit cards
Overdrafts
Other loans to clients
Net finance lease and instalment debtors
Preference shares and debentures
Specific impairment of loans and advances
Specific 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
2 440
908
52
986
436
3 782
2 343
1
184
290
(41)
947
222
2 945
1 194
29
(499)
(241)
11
(755)
(180)
(2 668)
(1 298)
2 125
957
22
1 178
478
4 059
2 239
29
1
10 948
5 770
(5 630)
11 088
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
364
92
(40)
990
214
2 444
1 295
13
5 372
311
165
(41)
936
202
2 561
1 170
5 304
(374)
(113)
51
(854)
(88)
(1 996)
(1 276)
(4 650)
(493)
(241)
11
(755)
(180)
(2 689)
(1 300)
(5 647)
1 360
443
33
1 181
447
2 525
1 135
13
7 137
1 370
464
22
1 045
321
2 077
1 116
6 415
Nedbank Limited – Annual Report 2016
51
C2
Impairment of loans and advances
(continued)
C2.2 Impairments of loans and advances by
classification (continued)
Portfolio impairment – 2016
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 – 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
Balance
at the
beginning
of the year
Rm
Impairment
charge/
(release)
Rm
Amounts
written off
against the
impairment/
Other
transfers
Rm
755
493
133
157
1 982
1 123
1
4 644
888
368
122
137
1 577
1 097
1
4 190
(122)
32
(6)
1
38
67
29
39
(127)
125
11
20
384
24
1
438
(6)
(2)
–
(50)
54
(12)
10
(6)
(6)
21
2
17
Total
Rm
627
523
127
108
2 074
1 178
39
1
4 677
755
493
133
157
1 982
1 123
1
1
4 645
C2.3 Sectoral analysis
Individuals
Financial services, insurance and real
estate
Manufacturing
Building and property development
Transport, storage and
communication
Retailers, catering and
accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing
Government and public sector
Other services
C2.4 Geographical analysis
SA
Other African countries
Europe
Asia
United States
Other
Total impairment
Specific impairment
Portfolio impairment
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
7 724
7 380
5 191
4 855
2 533
2 525
1 572
439
109
570
83
149
380
70
13
705
1 514
365
123
229
27
131
406
82
31
772
403
95
57
392
61
65
306
36
2
529
11 814
11 060
7 137
10 936
10 621
6 441
305
214
343
4
12
363
54
8
1
13
172
180
340
4
11 814
11 060
7 137
418
95
52
72
6
67
251
52
17
530
6 415
6 127
275
13
6 415
1 169
344
52
178
22
84
74
34
11
176
1 096
270
71
157
21
64
155
30
14
242
4 677
4 645
4 495
4 494
133
34
3
12
4 677
88
54
8
1
4 645
52
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C2.5 Interest on specifically impaired loans and advances
1 284
953
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 loans and advances. 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.
C3 Government and other securities
C3.1 Analysis
Government and government-guaranteed securities
Other dated securities¹
C3.2 Sectoral analysis
Financial services, insurance and real estate
Banks
Manufacturing
Transport, storage and communication
Government and public sector
Other sectors
¹
Includes securitised assets. See note F5.
C4 Other short-term securities
C4.1 Analysis
Negotiable certificates of deposit
Treasury bills and other bonds
C4.2 Sectoral analysis
Banks
Government and public sector
Other services
2016
Rm
2015
Rm
37 904
12 783
50 687
10 441
2 102
4 406
1 350
30 979
1 409
50 687
26 398
16 335
42 733
5 838
3 368
3 872
1 647
25 285
2 723
42 733
2016
Rm
2015
Rm
11 183
57 035
68 218
11 150
56 621
447
68 218
8 717
51 361
60 078
8 678
49 786
1 614
60 078
Nedbank Limited – Annual Report 2016
53
Investment
grade
Subinvestment
grade
Not
rated
Total
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
C5 Credit analysis of other
short-term securities,
and government and
other securities
CREDIT RATINGS
Other short-term securities
67 263
58 880
Negotiable certificates of deposit
11 133
8 717
Treasury bills and other
56 130
50 163
854
50
804
Government and other securities
47 570
35 133
2 453
Government and government-
guaranteed securities
Other dated securities
37 256
25 738
10 314
9 395
648
1 805
114 833
94 013
3 307
4 832
1 071
101
127
68 218
60 078
1 071
3 761
660
3 101
11 183
127
57 035
8 717
51 361
3 839
50 687
42 733
37 904
26 398
3 839
12 783
16 335
3 966
118 905
102 811
101
664
664
765
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- (stable). 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.
C6 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
¹
Represents amounts less than R1m.
2016
Rm
2015
Rm
7 344
12 897
¹
20 241
18 139
38 380
6 673
10 686
792
18 151
16 190
34 341
Money at call and short notice constitute amounts withdrawable in 32 days or fewer. 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.
54
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C7 Derivative financial instruments
Accounting policy
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 instruments and related income’.
The method of recognising fair-value gains and losses depends on whether derivatives are held for trading or are
designated as hedging instruments, and if the latter, the nature of the risks being hedged.
■ Derivatives that qualify for hedge accounting
The group applies hedge accounting when transactions meet the criteria set out in IAS 39. 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.
At the inception of a hedging relationship, the group designates and documents the relationship between the hedging
instrument and the hedge item as well as its risk management objective and strategy for undertaking the hedging
transactions, and the nature of the risk being hedged. The group also documents its assessment of whether the
hedging instrument is effective in offsetting changes in fair value or cashflow of the hedged item attributable to the
hedged risk.
Hedge effectiveness is assessed at inception and throughout the term of each hedging relationship. Each hedge must
be expected to be highly effective (prospective effectiveness), and demonstrate actual effectiveness (retrospective
effectiveness) on an ongoing basis.
For prospective effectiveness, the hedging instrument must be expected to be highly effective in offsetting changes in
fair value or cashflows attributable to the hedged 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, while 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 or exercised, no longer meets the criteria for fair-value hedge accounting,
or the designation is revoked, then hedge accounting is discontinued.
■ 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
accounting are recognised immediately in non-interest revenue.
Embedded derivatives
Derivatives in a host contract that is a financial or non-financial instrument, such as an equity-conversion option in a
convertible bond, are separated from the host contract when all of the following conditions are met:
■ The economic characteristics and risks of the embedded derivative are not closely related to those of the host
contract.
■ 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.
Principal types of derivatives
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 swaps, options, futures and forwards.
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.
Nedbank Limited – Annual Report 2016
2016
Rm
2015
Rm
55
C7 Derivative financial instruments (continued)
C7.1 Total carrying amount of derivative financial instruments
Gross carrying amount of assets
Gross carrying amount of liabilities
Net carrying amount
18 044
(13 469)
4 575
30 948
(33 996)
(3 048)
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 C7.2 – C7.5.
C7.2 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.
Hedging derivatives
Interest rate derivatives
Interest rate swaps
Other derivatives
Equity derivatives
Options written
Options purchased
Futures¹
Commodity derivatives
Options purchased
Caps and floors
Swaps
Futures
Exchange rate derivatives
Forwards
Futures
Currency swaps
Options purchased
Options written
Interest rate derivatives
Interest rate swaps
Forward rate agreements
Futures
Caps
Floors
Notional
principal
Rm
2016
Positive
value
Rm
Negative
value
Rm
Notional
principal
Rm
2015
Positive
value
Rm
Negative
value
Rm
275
275
275
275
17 848
8 341
9 128
2 208
2 208
4 712
4 800
6
3 006
10
1 778
316 107
243 904
39
58 967
6 203
6 994
1 445 315
789 543
632 233
558
4 375
750
4 090
2 208
1 882
3 011
3 006
5
165 389
128 796
27
30 363
6 203
784 122
422 789
348 606
513
750
5 038
2 208
2 830
1 789
6
5
1 778
150 718
115 108
12
5 959
5 994
5 895
421
–
–
–
421
389 194
352 685
63
28 604
32 036
6 994
2 196
2 214
661 193
1 086 256
366 754
283 627
558
3 862
517 120
531 654
3 105
2 948
1 843
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
Credit default swaps
17 856
11 464
6 392
29 586
18 059
Total notional principal
1 775 625
956 887
818 738
1 493 994
730 657
763 337
¹
Includes contracts for difference with positive notionals of R81m (2015: R124m) and negative notionals of R1 029m (2015: R1 326m). The equity-forward
agreement has positive notionals of R1 801m (2015: R591m) and negative notionals of R1 801m (2015: R1 536m).
56
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C7.3 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.
2016
Carrying
amount of
assets
Rm
Net carrying
amount
Rm
Carrying
amount of
liabilities
Rm
Net carrying
amount
Rm
2015
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
Options written
Options purchased
Swaps
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
5
–
(201)
201
–
(97)
(1)
4
(105)
5
2 253
2 092
(6)
176
330
(339)
2 414
2 279
57
(2)
(2)
1
81
5
445
201
244
235
4
226
5
8 769
5 680
135
2 624
330
8 590
8 198
240
4
1
147
27
–
(418)
418
–
(59)
–
–
–
(59)
(1 154)
59
18
(1 285)
184
(130)
(1 862)
(2 388)
(19)
1
(23)
1
566
27
902
418
484
24
24
17 760
11 383
18
6 175
184
12 235
10 827
329
44
2
1
1 032
902
418
484
83
83
18 914
11 324
7 460
130
14 097
13 215
348
43
25
466
445
201
244
332
1
331
6 516
3 588
141
2 448
339
6 176
5 919
183
2
6
66
Total carrying amount
4 575
18 044
13 469
(3 048)
30 948
33 996
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 R90m (2015: R264m).
Nedbank Limited – Annual Report 2016
57
Rm
C7 Derivative financial
instruments (continued)
C7.4 Analysis of derivative
financial instruments
Derivative assets
2016
Maturity analysis
Under one year
One to five years
Over five years
2015
Maturity analysis
Under one year
One to five years
Over five years
Derivative liabilities
2016
Maturity analysis
Under one year
One to five years
Over five years
2015
Maturity analysis
Under one year
One to five years
Over five years
Hedging
derivatives
Interest
rate
derivatives
Other derivatives
Equity
derivatives
Commodity
derivatives
Exchange
rate
derivatives
Interest
rate
derivatives
Total
1
4
5
5
22
27
173
272
445
283
619
902
173
272
–
445
283
619
10
225
235
24
24
1
331
332
83
6 155
1 378
1 236
8 769
13 623
3 155
982
17 760
4 106
1 401
1 009
6 516
12 527
2 999
3 388
18 914
952
2 214
5 424
8 590
616
3 600
8 019
12 235
640
1 673
3 863
6 176
569
3 975
9 553
14 097
7 290
4 090
6 664
18 044
14 546
7 379
9 023
30 948
4 920
3 677
4 872
13 469
13 462
7 593
12 941
33 996
Notional principal of derivatives
–
902
83
2016
Maturity analysis
Under one year
One to five years
Over five years
2015
Maturity analysis
Under one year
One to five years
Over five years
75
200
275
75
200
275
3 107
4 911
1 110
9 128
10 541
5 856
1 451
17 848
4 790
259 980
10
31 264
24 863
653 056
504 455
287 804
920 933
540 715
313 977
4 800
316 107
1 445 315
1 775 625
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
The maturity analysis in this note is prepared based on contractual maturities.
58
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C7.5 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 C3).
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:
Profit/(Loss) on hedged items (assets) (note B5.1)
(Loss)/Profit on hedging instruments (assets) (note B5.1)
2016
Rm
25
(22)
3
2015
Rm
(20)
24
4
Nedbank Limited – Annual Report 2016
59
SECTION D: CORE BANKING LIABILITIES
ACCOUNTING POLICY
Refer to Section I: Financial instruments for the group’s accounting policies regarding financial assets and liabilities.
D1 Amounts owed to depositors
D1.1 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
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 C3) and negotiable certificates of deposit (note C4)
amounting to R19 162m (2015: R15 614m) 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 R19 127m (2015: R15 531m).
D1.2 Sectoral analysis
Banks
Government and public sector
Individuals
Business sector
D1.3 Geographical analysis
SA
Rest of Africa
Europe
Asia
United States of America
2016
Rm
2015
Rm
71 403
10 036
529 166
286 647
49 070
66 946
126 503
34 107
86 480
19 127
67 504
9 820
492 764
269 716
46 478
60 753
115 817
44 823
77 594
15 531
750 319
708 036
708 627
655 024
41 692
53 012
750 319
708 036
41 692
62 343
188 621
457 663
53 012
47 880
168 698
438 446
750 319
708 036
731 478
685 149
8 329
9 458
1 029
25
8 316
11 338
3 233
750 319
708 036
60
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Instrument type
Maturity dates
Interest rates
2016
Rm
2015
Rm
D2 Long-term debt
instruments
Subordinated debt¹
Callable notes (rand-denominated
– floating)
6 July 2022 to
22 September 2026
JIBAR plus 0,47%
to JIBAR plus 4,00%
11 065
9 041
Callable notes (rand-denominated
– fixed)
8 April 2024 to
1 July 2025
10,49% to 11,29%
891
891
Callable notes (US dollar-
denominated)
Securitised liabilities²
3 March 2022
Three-month USD LIBOR
1 378
1 563
Callable notes (rand-denominated
– floating)
27 January 2028 to
25 February 2042
Senior unsecured debt³
Senior unsecured notes – fixed
Senior unsecured notes – floating
23 March 2016 to
19 November 2027
23 March 2016 to
31 July 2026
Unsecured debentures
30 November 2029
Zero coupon
Total long-term debt instruments
in issue
JIBAR plus 0,58% to 3,00%
3 003
2 679
8,79% to 11,39%
17 967
16 592
JIBAR plus 0,75% to 2,25%
17 736
22
14 193
18
52 062
44 977
¹
²
³
During 2016 a R2bn floating-rate note was issued with a rate of JIBAR plus 400 bps, which is repayable on 22 September 2026.
During 2016 three securitised liabilities were issued. A total of R787m was issued with a rate of three-month JIBAR plus 125 bps to 154 bps and is repayable
on 27 January 2028.
During 2016 five senior unsecured debt instruments were repaid and 16 senior unsecured debt instruments were issued. An amount of R1,8bn was issued as
fixed-interest-rate notes with interest rates ranging between 10,01% and 11,15%, which are repayable between 17 February 2023 and 31 July 2026. A total
of R9,0bn floating-rate notes with a rate of three-month JIBAR plus 140 bps to 225 bps were issued and are repayable between 18 February 2019 and
31 July 2026.
Nedbank Limited – Annual Report 2016
61
Rm
D3 Contractual maturity analysis for financial liabilities
2016
Long-term debt instruments
Amounts owed to depositors
Current accounts
Savings deposits
Other deposits and loan accounts
Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Derivative financial instruments – liabilities
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2015
Long-term debt instruments
Amounts owed to depositors
Current accounts
Savings deposits
Other deposits and loan accounts
Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Derivative financial instruments – liabilities
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
Statement
of financial
position
amount
< 3 months
52 062
750 319
71 403
10 036
529 166
34 107
86 480
19 127
13 469
16 489
3 363
546 765
71 405
10 036
405 528
22 352
18 301
19 143
2 229
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
maturity
Total
Non-
determinable
1 740
74 799
4 578
70 444
38 488
70 281
25 163
9 699
–
48 103
3 135
23 561
33 506
5 860
31 078
44 571
2 762
22 948
9 699
1 329
1 362
3 678
4 872
832 339
552 357
77 868
76 384
112 447
39 734
22 177
3 360
101 566
127 103
5 761
515 772
67 506
9 820
371 842
30 693
20 368
15 543
7 998
44 977
708 036
67 504
9 820
492 764
44 823
77 594
15 531
33 996
13 770
742
58 518
5 637
62 361
29 997
77 482
22 263
11 655
–
34 631
6 305
17 582
32 722
4 663
24 976
51 505
3 163
22 814
11 655
2 882
2 582
7 593
12 941
800 779
529 531
62 142
70 580
115 072
46 859
26 374
4 419
101 747
132 540
73 332
771 988
71 405
10 036
541 407
34 109
95 888
19 143
13 470
16 488
875 278
22 177
3 360
101 566
127 103
64 400
725 788
67 506
9 820
502 355
44 824
85 740
15 543
33 996
13 769
837 953
26 374
4 419
101 747
132 540
16 488
16 488
13 769
13 769
Provisions and other liabilities are included in this table in order to provide a reconciliation with the statement of financial
position and also include current and deferred taxation liabilities and long-term employee benefit liabilities. Derivatives are
not profiled on an undiscounted basis.
62
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
D3 Contractual maturity analysis for financial liabilities
Rm
2016
Long-term debt instruments
Amounts owed to depositors
Current accounts
Savings deposits
Other deposits and loan accounts
Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Derivative financial instruments – liabilities
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2015
Long-term debt instruments
Amounts owed to depositors
Current accounts
Savings deposits
Other deposits and loan accounts
Foreign currency liabilities
Negotiable certificates of deposit
Deposits received under repurchase agreements
Derivative financial instruments – liabilities
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
Statement
of financial
position
amount
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Non-
determinable
maturity
1 740
74 799
4 578
70 444
38 488
70 281
25 163
9 699
–
48 103
3 135
23 561
33 506
5 860
31 078
44 571
2 762
22 948
9 699
1 329
1 362
3 678
4 872
832 339
552 357
77 868
76 384
112 447
39 734
16 488
16 488
742
58 518
5 637
62 361
29 997
77 482
22 263
11 655
–
34 631
6 305
17 582
32 722
4 663
24 976
51 505
3 163
22 814
11 655
2 882
2 582
7 593
12 941
800 779
529 531
62 142
70 580
115 072
46 859
13 769
13 769
52 062
750 319
71 403
10 036
529 166
34 107
86 480
19 127
13 469
16 489
44 977
708 036
67 504
9 820
492 764
44 823
77 594
15 531
33 996
13 770
3 363
546 765
71 405
10 036
405 528
22 352
18 301
19 143
2 229
22 177
3 360
101 566
127 103
5 761
515 772
67 506
9 820
371 842
30 693
20 368
15 543
7 998
26 374
4 419
101 747
132 540
Total
73 332
771 988
71 405
10 036
541 407
34 109
95 888
19 143
13 470
16 488
875 278
22 177
3 360
101 566
127 103
64 400
725 788
67 506
9 820
502 355
44 824
85 740
15 543
33 996
13 769
837 953
26 374
4 419
101 747
132 540
Provisions and other liabilities are included in this table in order to provide a reconciliation with the statement of financial
position and also include current and deferred taxation liabilities and long-term employee benefit liabilities. Derivatives are
not profiled on an undiscounted basis.
Nedbank Limited – Annual Report 2016
63
SECTION E: ASSET MANAGEMENT
E1 Managed funds
ACCOUNTING POLICY
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.
E2 Fair value of funds under management
SA unit trusts
E3 Reconciliation of movement in funds under management
Balance at 31 December 2014
Inflows
Outflows
Mark-to-market value adjustment
Balance at 31 December 2015
Inflows
Outflows
Mark-to-market value adjustment
Balance at 31 December 2016
2016
Rm
2015
Rm
170 933
153 801
SA
unit trusts
Rm
128 394
240 622
(222 072)
6 857
153 801
310 782
(292 253)
(1 397)
170 933
64
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F
F1
SECTION F: INVESTMENTS
Investment securities
ACCOUNTING POLICY
Refer to Section I: Financial instruments for the group’s accounting policies regarding financial assets and liabilities.
Listed investments
Unlisted investments
Strate Ltd
Private-equity portfolio
Other
Total listed and unlisted investments
2016
Rm
19
1 889
130
713
1 046
1 908
2015
Rm
432
1 216
57
618
541
1 648
Refer to note I2.2.1 for the classification of investment securities in terms of the fair-value hierarchy.
F2
Investments in private-equity associates, associate companies and joint
arrangements
ACCOUNTING POLICY
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.
The group’s share of postacquisition profit or loss and postacquisition movements in other comprehensive income are
recognised in the income statement and OCI, 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 accounting period ends. 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 note G.
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 H2.
Nedbank Limited – Annual Report 2016
65
F2
Investments in private equity associates, associate companies and joint
arrangements (continued)
ACCOUNTING POLICY (continued)
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 returns of the
arrangements. They are classified as either joint operations or joint ventures, depending on the contractual rights and
are obligations of the investor, and are 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.
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 is to account for the transaction at book values as reflected in the consolidated financial
statements of the selling entity.
The excess of the cost of the transaction over the acquirer’s proportionate share of the net assets value acquired in
common-control transactions, will be allocated to the common control reserve in equity.
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.
66
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F2.1 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
F2.2 Analysis of carrying amount
Associate investments – on acquisition: Net asset value
Share of retained earnings since acquisition
Fair-value movements
¹ These amounts include movements due to acquisitions and disposals.
2016
Rm
2015
Rm
1 400
1 158
(20)
921
274
(1)
24
219
2 575
1 400
1 870
19
686
2 575
949
39
412
1 400
Nedbank Limited – Annual Report 2016
67
F2
Investments in private-equity associates, associate companies and joint
arrangements (continued)
F2.3 Analysis of investments in private-equity associates, associate companies and joint
arrangements
Percentage holding
Carrying amount
to/(from) associates
Dividends received
Nature of activities
Property development
Property development
Property development
Property development
2016
%
50
20
35
49
2015
%
50
20
35
49
Measure-
ment
Acquisition
method
date
Year-end
Fair value
Fair value
Fair value
Fair value
Dec 10
Aug 02
Aug 05
Aug 07
Dec
Feb
Feb
Feb
Century City JV
Friedshelf 113 (Pty) Ltd
Masingita Property Investment Holdings (Pty) Ltd
Odyssey Developments (Pty) Ltd¹
Other individually immaterial associates²
Private-equity associates (manufacturing, industrial,
leisure and other)
Private-equity associates (property investment associates)
Other
Individually immaterial joint arrangements²
Various
Various
All investments in associate companies and joint arrangements are unlisted. There are no regulatory constraints, apart from
the provisions of the Companies Act, 71 of 2008, that restrict the distribution of funds to the shareholders. Distribution of
funds may, however, be restricted by loan agreements that the entities have entered into. All associates and joint
arrangements are considered to be strategic to the group’s activities.
Unless otherwise stated, all entities are domiciled and incorporated in SA. The group has the same proportion of voting rights
as its proportion of ownership interest, unless stated otherwise, and has not incurred any contingent liabilities with regard to
the associates or joint arrangements listed above.
No significant judgement or assumptions were applied in concluding that the group has significant influence over the
associates mentioned above or that the group has joint control over the joint arrangements mentioned above.
¹ The group’s proportion of ownership in the entity is 49%, while its voting right equates to 35%.
² Represents various investments that are not individually material.
2016
Rm
2015
Rm
2016
Rm
2015
Rm
Group
Net indebtedness of loans
2016
Rm
55
1
279
62
601
1 230
225
122
2 575
2015
Rm
55
172
56
487
293
245
92
1 400
1
98
54
191
985
127
1 456
1
74
49
226
1 633
4
140
2 127
23
133
22
156
22
68
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F2
Investments in private-equity associates, associate companies and joint
F2.3 Analysis of investments in private-equity associates, associate companies and joint
arrangements (continued)
arrangements
Nature of activities
Property development
Property development
Property development
Property development
Century City JV
Friedshelf 113 (Pty) Ltd
Masingita Property Investment Holdings (Pty) Ltd
Odyssey Developments (Pty) Ltd¹
Other individually immaterial associates²
Private-equity associates (manufacturing, industrial,
Private-equity associates (property investment associates)
leisure and other)
Other
Individually immaterial joint arrangements²
Various
Various
All investments in associate companies and joint arrangements are unlisted. There are no regulatory constraints, apart from
the provisions of the Companies Act, 71 of 2008, that restrict the distribution of funds to the shareholders. Distribution of
funds may, however, be restricted by loan agreements that the entities have entered into. All associates and joint
arrangements are considered to be strategic to the group’s activities.
Unless otherwise stated, all entities are domiciled and incorporated in SA. The group has the same proportion of voting rights
as its proportion of ownership interest, unless stated otherwise, and has not incurred any contingent liabilities with regard to
the associates or joint arrangements listed above.
No significant judgement or assumptions were applied in concluding that the group has significant influence over the
associates mentioned above or that the group has joint control over the joint arrangements mentioned above.
¹ The group’s proportion of ownership in the entity is 49%, while its voting right equates to 35%.
² Represents various investments that are not individually material.
Percentage holding
2016
%
50
20
35
49
2015
%
50
20
35
49
Measure-
ment
method
Fair value
Fair value
Fair value
Fair value
Acquisition
date
Year-end
Dec 10
Aug 02
Aug 05
Aug 07
Dec
Feb
Feb
Feb
Carrying amount
Net indebtedness of loans
to/(from) associates
Dividends received
Group
2016
Rm
55
1
279
62
601
1 230
225
122
2 575
2015
Rm
55
172
56
487
293
245
92
1 400
2016
Rm
2015
Rm
2016
Rm
2015
Rm
1
98
54
191
985
127
1 456
1
74
49
226
1 633
4
140
2 127
23
133
22
156
22
Nedbank Limited – Annual Report 2016
69
F3
Investments in subsidiary companies and related disclosure
Accounting policy
Subsidiary undertakings and consolidated structured entities
Subsidiary undertakings are those entities, including unincorporated entities such as trusts and partnerships, that are
controlled by the group. The group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. The group is
considered to have power over an entity when it has existing rights that give it the current ability to direct the relevant
activities of the entity. The group is exposed, or has rights, to variable returns from its involvement with the entity when
the investor’s returns from its involvement have the potential to vary as a result of the entity’s performance. The group
considers all facts and circumstances relevant to its involvement with an entity to evaluate whether control exists. The
group assesses any changes to the facts and circumstances relevant to the entity and reassesses the consolidation
requirements on a continuous basis.
The consolidated financial statements include the assets, liabilities and results of the company plus subsidiaries,
including consolidated structured entities from the date control is established until the date that control ceases.
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 their 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.
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.
Company
Investments in group companies are accounted for at cost less impairment losses in the separate financial statements.
The carrying amounts of these investments are reviewed annually and impaired when necessary by applying the
impairment methodology described in note G.
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 OCI. Changes in the fair value of a contingent consideration that has
been classified as equity are not recognised.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under
IFRS 3: Business Combinations are recognised at their fair value at the date of acquisition, except:
■ Deferred taxation assets or liabilities, which are recognised and measured in accordance with IAS 12: Income Taxes,
and liabilities or assets related to employee benefit arrangements, which are recognised and measured in accordance
with IAS 19: Employee Benefits.
■ Liabilities or equity instruments that relate to the replacement, by the group, of an acquiree’s share-based payment
awards, which are measured in accordance with IFRS 2: Share-based Payments.
■ 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.
70
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Accounting policy (continued)
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 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.
Investments in foreign operations
Nedbank Group 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.
Key assumptions concerning the future and key sources of estimation
Derecognition
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.
Nedbank Limited – Annual Report 2016
71
Investments in subsidiary companies and related disclosure (continued)
F3
F3.1 Analysis of investments in subsidiary companies
Banking²
Nedbank (Lesotho) Ltd
Nedbank (Swaziland) Ltd
Other companies³
Depfin Investments (Pty) Ltd
Nedcor Trade Services Ltd (Mauritius)
Nedcor Investments Ltd
Group
Issued capital
Effective holding
2016
Rm
2015
Rm
20
12
¹
4
28
20
12
¹
4
28
2016
Rm
100
65,08
100
100
100
2015
Rm
100
65,08
100
100
100
¹
²
Represents amounts less than R1m.
The banking subsidiary companies are restricted in terms of Basel regulations and prudential requirements with regard to the distributions of funds to
their holding company.
³
These entities are free of any restrictions imposed on the distribution of funds, save for compliance with any local regulations.
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 as 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
2016
Rm
10 160
(17)
10 143
2015
Rm
8 315
(40)
8 275
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.
F3.2 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
72
Nedbank Limited – Annual Report 2016
Nedbank (Swaziland) Ltd
2016
Rm
4 235
3 576
229
222
161
121
120
42
216
(9)
(31)
176
11
2015
Rm
3 874
3 306
198
179
156
115
120
40
637
(9)
(27)
601
9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Interests in structured consolidated and unconsolidated structured entities
F4
F4.1 Consolidated structured entities
The group holds certain interests in consolidated structured entities in order to ringfence 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 H1)
■ Securitisation vehicles (refer to note F5)
Synthesis Funding Ltd
Greenhouse Funding (RF) Ltd
Greenhouse Funding III (RF) Ltd
Precinct Funding 1 (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 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. The group acts in various
capacities with regard to this vehicle, which includes the role of master liquidity facility provider, programmewide 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.
The group has set up securitisation vehicles that acquire the rights, title, interest and related security of commercial and
residential mortgage bonds from Nedbank Ltd. The creation of the these vehicles facilitated the group having appropriately
collaterised instruments that can be pledged against the group’s committed liquidity facility provided by SARB, if required.
The group has concluded that it controls these entities.
Refer to note F5 for further information on the securitisation activities of the group.
Nedbank Limited – Annual Report 2016
73
F5 Securitisations
Accounting policy
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 or other residual interests (retained interests). Retained interests are
primarily recorded in available-for-sale investment securities and carried at fair value.
Key assumptions concerning the future and key sources of estimation
The group sponsors the formation of structured entities primarily for the purpose of securitising financial assets for
funding diversification purposes and to add flexibility in mitigating structural liquidity risk. Where it is difficult to
determine whether the group controls a structured entity, the group makes judgements in terms of IFRS about its
exposure to the risks and rewards, as well as about its ability to make operational decisions for the structured entity in
question. In arriving at judgements, these factors are considered both jointly and separately.
Active securitisation transactions
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;
■ 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 Funding 1’), a commercial-mortgage-backed securitisation 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 SA local-currency credit rating by Global Credit
Rating Co (Pty) Ltd. At 31 December 2016 none of the commercial paper in issue was listed on the JSE.
Liquidity facilities have been obtained from a bank rated as P-1.za (Moody’s) or zaA-1 (Standard & Poor’s) to ensure the
availability of sufficient funds in instances where timing mismatches could occur. These timing mismatches refer to the
possible mismatch between the receipt of funds relating to financial assets and the disbursement of funds relating to the
redemption of financial liabilities. These liquidity facilities cover the nominal value of the commercial paper issued and exceed
the maturity date of the underlying commercial paper by five days.
Synthesis is a partially supported conduit whose credit support is dependent on transaction-specific credit enhancement as
well as available programmewide 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-(ZA)(sf), Synthesis must remove the asset from
the portfolio or obtain a guarantee by an entity rated at least AA-(ZA)(sf) or Nedbank must post PWCE within 15 business
days. Currently all securities in the conduit portfolio are rated at least AA-(ZA)(sf) or are guaranteed by Nedbank if rated
below AA-(ZA)(sf). As a result no PWCE is currently required in accordance with Synthesis’ transaction documentation.
On 8 December 2016 the directors and shareholder of Synthesis resolved, subject to the relevant regulatory approvals, to
unwind the commercial-paper programme following the disposal by the company of all its assets (‘the unwind disposal’). This
unwind disposal will be affected during the 2017 financial year.
Greenhouse programmes (Greenhouse and Greenhouse III)
The Greenhouse transactions are securitisation vehicles through which the rights, title, interest and related security in respect
of residential home loans are acquired 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, were 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 Moody’s and listed on the JSE, were placed with third-party
investors, and the junior notes and subordinated loans retained by the group. The home loans transferred to Greenhouse
have continued to be recognised as financial assets.
Greenhouse III, a second standalone residential-mortgage-backed securitisation programme, was implemented during 2014.
Greenhouse III securitised R2bn worth of home loans originated by Nedbank Ltd through the issuance of senior notes to the
capital market and subordinated notes and a subordinated loan provided by Nedbank Ltd. The notes issued by Greenhouse III
are listed on the JSE and rated by Moody’s.
The Greenhouse vehicles make use of an internal risk management policy, and utilises the Nedbank Group credit risk
monitoring process to govern lending activities to external parties. In addition, financial assets may be introduced into the
programme only if they meet the eligibility criteria of the programme agreements.
74
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Nedbank Ltd provided the Greenhouse programmes with interest-bearing subordinated loans at the commencement of each
programme to provide 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 maturity 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 class C and class Y notes amounting to R113m and in the Greenhouse III
structure Nedbank holds the class D note, amounting to R100m. These notes are subordinated to the higher-ranking notes in
terms of the priority of payments.
Precinct Funding 1
Precinct Funding 1 is a commercial-mortgage-backed securitisation 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 SA.
The Precinct Funding 1 structure takes the form of a static pool of small commercial-property loans with limited substitution
and redraws or further advance capabilities.
Precinct Funding 1 has issued notes rated by Moody’s that are listed on JSE Ltd. The class A and class B notes were placed
with third-party investors and the junior notes and subordinated loan retained by Nedbank Ltd.
The vehicle makes use of an internal risk management policy and utilises the Nedbank Group Ltd 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 Ltd provided Precinct Funding 1 with an interest-bearing subordinated loan at the commencement of this
transaction to provide 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 maturity date, provided that
all outstanding notes have been redeemed in full and all secured creditors have been settled.
Nedbank holds the class C and class D notes amounting to R202m, which are subordinated to the higher-ranking 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
2016
2015
Carrying
amount of
assets
Associated
liabilities
Carrying
amount of
assets
Associated
liabilities
2 831
3 176
(23)
982
(3)
203
469
4 459
1 283
671
5 130
3 287
(24)
1 280
(3)
1 714
1 038
7 292
3 596
2 277
2 749
8 622
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 2016
75
F6 Related parties
F6.1 Relationship with parent, ultimate controlling party and investees
The group’s parent company is Nedbank Group Ltd, which holds 100% (2015: 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 F3.1 and associate companies and joint arrangements of the group
are identified in note F2.3.
F6.2 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.
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)
2016
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
2015
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
Number of share instruments
2016
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Transferred
Outstanding at the end of the year
2015¹
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at the end of the year
Key
management
personnel
Directors
Total
17
78
48
30
95
15
106
51
55
121
172
109
63
172
213
124
89
213
17
250
157
93
267
15
319
175
144
334
517 704
1 532 489
2 050 193
205 927
480 001
685 928
(91 777)
(91 777)
(192 368)
(555 720)
(748 088)
8 401
(156 893)
(148 492)
539 664
1 208 100
1 747 764
578 469
1 574 989
2 153 458
151 434
475 147
(32 866)
626 581
(32 866)
(212 199)
(505 584)
(717 783)
20 803
20 803
517 704
1 532 489
2 050 193
¹
2015 comparatives have been restated due to key management personnel not classified in the correct category (56 531 shares which equates to R3m).
76
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F6.3 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) Ltd¹
Bank accounts owing to Nedbank Group Ltd
Bank balances owing to Old Mutual Life Assurance Company (SA) Ltd¹
Accounts payable to Old Mutual plc
Accounts receivable from Old Mutual plc
Derivatives receivable from Old Mutual subsidiaries
Derivatives payable to Old Mutual subsidiaries
Bonds payable to Old Mutual subsidiaries
Forward exchange rate contracts with Old Mutual plc
Fellow subsidiaries
Loan due from other fellow subsidiaries
Loans owing to Nedgroup Securities (Pty) Ltd
Loans owing to Nedbank Malawi Ltd
Loans (owing to)/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 due from/(owing to) Nedgroup Securities (Pty) Ltd
Bank balances owing to Syfrets Securities Ltd
Deposits owing to/(due from) Syfrets Securities Ltd
Deposits due from other fellow subsidiaries
Bank balances owing to other fellow subsidiaries
Equity derivatives with fellow subsidiaries
Forward exchange rate contracts with various fellow subsidiaries
Interest rate contracts with various fellow subsidiaries
Associates
Loans due from associates
Deposits owing to associates
Bank balances owing to associates
Key management personnel
Mortgage bonds due from key management personnel
Deposits owing to key management personnel
Deposits owing to entities under the influence of key management personnel
Bank balances due from key management personnel
Bank balances owing to key management personnel
Bank balances due from entities under the influence of key management personnel
Bank balances owing to entities under the influence of key management personnel
Key management personnel – directors²
Key management personnel – other²
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 funds¹
Due from/(Owing to)
2016
2015
(1 607)
(501)
(7 993)
(54)
1
360
(285)
(850)
(294)
(4 626)
904
(547)
(1 077)
(1 087)
41
2
427
7 103
(76)
(13 722)
(55)
(2)
58
(12 654)
1 466
(3 235)
(99)
89
(27)
1 455
(60)
(1)
20
(4)
(103)
3
(8)
(43)
(39)
(103)
(142)
–
(2)
(64)
(561)
(168)
2 973
(66)
(27)
(764)
(6)
448
912
(4 473)
(2)
(2)
2 127
(20)
(14)
28
(22)
(73)
4
(27)
33
(241)
(38)
(128)
(166)
(2)
(2)
(4)
(1)
(23)
(2 390)
(2 361)
¹
Subsequent to the completion of the 2015 consolidated financial statements, additional related-party balances between the group and the group’s parent
and fellow subsidiaries were identified. The comparative disclosure has been restated accordingly. Previously the balances reported were as follows:
Nedbank Limited – Annual Report 2016
77
F6 Related parties (continued)
F6.3 Related-party transactions (continued)
Outstanding balances (Rm)
Owing to
Parent/Ultimate controlling party
Deposits owing to Old Mutual Life Assurance
Company (Pty) Ltd
Bank balances owing to Old Mutual Life Assurance
Company (Pty) Ltd
Derivatives receivable from Old Mutual subsidiaries
Derivatives payable to Old Mutual subsidiaries
Bonds payable to Old Mutual subsidiaries
Long-term employee benefit plans
Bank balances and deposits owing to other funds
(7)
(351)
Rnil
Rnil
Rnil
(45)
²
2015 comparatives have been restated due to key management
personnel not classified in the correct category (56 531 shares
which equates to R3m).
Transactions (Rm)
Parent/Ultimate controlling party
Interest expense to Old Mutual Life Assurance Company (Pty) Ltd¹
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
Fees received for provision of information technology services
Associates
Interest expense to associates
Key management personnel
Interest income from key management personnel
Interest income from entities under the influence of key management personnel
Interest expense to key management personnel
Interest expense to entities under the influence of key management personnel
The share-based payments charge in respect of the entities that are participants in the
Nedbank Eyethu BEE schemes and key management personnel is detailed below:
Key management personnel – other
Share-based payments expense (included in BEE transaction expenses)
Key management personnel – directors
Key management personnel – other
Share-based payments expense (included in staff costs)
Income/(Expense)
2016
2015
(468)
(2 300)
(649)
(2 500)
28
122
203
5
(893)
(169)
(2)
(17)
218
(69)
125
25
940
50
27
(537)
(394)
(12)
(1 104)
168
(75)
(8)
(24)
2
111
(2)
(58)
(2)
(2)
(26)
(45)
(71)
3
85
(34)
(147)
(3)
(3)
(8)
(52)
(60)
¹
Subsequent to the completion of the 2015 consolidated financial statements, additional related-party balances between the group and the group’s parent
and fellow subsidiaries were identified. The comparative disclosure has been restated accordingly. Previously the balances reported were as follows:
Transactions (Rm)
Parent/Ultimate controlling party
Interest expense to Old Mutual Life Assurance Company
(SA) (Pty) Ltd
Expense
(221)
²
2015 comparatives have been restated due to key management personnel not classified in the correct category (56 531 shares which equates to R3m).
78
Nedbank Limited – Annual Report 2016
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 H1.1)
Included in long-term employee benefit assets
Optiplus policy obligation
Postretirement medical aid obligation
Disability obligation
Income/(Expense)
2016
2015
(1)
(204)
(3)
(159)
784
1 342
571
2 697
(784)
(1 342)
(408)
781
1 254
543
2 578
(781)
(1 254)
(373)
Included in long-term employee benefit liabilities
(2 534)
(2 408)
SECTION G: GENERIC ASSETS
Accounting policy
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 annually, for impairment.
The recoverable amount of an asset is the higher of its fair value less cost to sell and its VIU. 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 VIU 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 cash-generating unit (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.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised
as part of the costs of these assets. Qualifying assets are assets that necessarily take a substantial period of time to
prepare for their intended use or sale. Capitalisation of borrowing costs continues up to the date when the assets are
substantially ready for their use or sale.
All other borrowing costs are expensed in the period in which they are incurred.
Borrowing costs capitalised are disclosed in the notes by asset category and are calculated at the group’s average
funding cost, except to the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset.
Where this occurs, actual borrowing costs incurred, less any investment income on the temporary investment of those
borrowings, are capitalised.
Nedbank Limited – Annual Report 2016
79
G1 Property and equipment
Accounting policy
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 equity under the heading ‘Revaluation
reserve’. However, revaluation increases are recognised in profit or loss to the extent that they reverse a revaluation
decrease of the same asset previously recognised in profit or loss. Revaluation decreases are recognised in profit or loss.
However, decreases are debited directly to equity to the extent of any credit balance existing in the revaluation surplus in
respect of the same asset. Land and buildings are revalued on the same basis as investment properties.
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: Non-
current Assets Held for Sale and Discontinued Operations 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.
80
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Accounting policy (continued)
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 incurred by the group,
such as commission paid, 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 is 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.
Standards and interpretations issued and not yet effective
IFRS 16: Leases
The IASB issued IFRS 16: Leases in January 2016. IFRS 16 replaces IAS 17: Leases and its related interpretations for
reporting periods beginning on or after 1 January 2019.
The group as lessee: IFRS 16 introduces a ‘right of use’ model whereby the lessee recognises a right-of-use asset and an
associated financial obligation to make lease payments for all leases with a term of more than 12 months. The asset will
be amortised over the lease term and the financial liability measured at amortised cost with interest recognised in profit
and loss using the effective interest rate method.
The group as lessor: IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a
lessor continues to classify and account for its leases as operating leases or finance leases.
The group is in the process of assessing the impact of IFRS 16.
Nedbank Limited – Annual Report 2016
81
G1 Property and equipment (continued)
Land
Buildings
Computer equipment
equipment
Vehicles
Total
Furniture and other
Gross carrying amount
Balance at 1 January
Transfers from furniture and other equipment and buildings
Acquisitions
Increases arising from revaluations¹
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
Balance at 31 December
Accumulated depreciation and impairment losses
Balance at 1 January
Transfers from furniture and other equipment and buildings
Depreciation charge for the year
Transfers to non-current assets held for sale
Writeoff of accumulated depreciation on revaluations
Disposals
Effect of movements in foreign exchange rates and other
movements
Balance at 31 December
Carrying amount
At 1 January
At 31 December
2016
Rm
2015
Rm
2016
Rm
885
873
6 237
1
(62)
13
1
825
(1)
885
–
–
356
56
(162)
(150)
(86)
3
1 350
368
(7)
(86)
(103)
(1)
1 521
885
825
873
885
4 887
4 733
2015
Rm
4 221
1 683
459
146
(144)
(128)
402
875
316
(128)
(115)
1 350
3 819
4 887
6 254
6 237
4 646
3 895
2 388
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
3 895
3 083
2 252
24
13 296
895
874
226
(139)
(67)
(76)
(83)
(4)
3 840
(1 683)
164
14
2 252
2 126
(875)
222
27
5
28
19
3
18
8
10
(15)
17
14 141
13 296
5 182
4 582
–
1 482
57
(224)
(369)
(86)
–
1 181
(7)
(86)
(314)
(12)
5 944
8 114
8 197
12 041
–
1 501
159
–
(294)
(128)
–
969
–
(128)
(249)
8
5 182
7 459
8 114
4
(1)
27
15
3
1
19
9
8
(5)
5
(14)
2 405
2 039
1 408
599
428
211
(137)
(64)
(70)
(70)
(4)
(2)
2
(9)
5
2 865
2 405
1 540
1 408
1 490
1 781
1 044
1 490
844
848
1 714
844
¹
Gains on property revaluations are recognised in profit or loss to the extent that they reverse a revaluation decrease of the same asset previously
recognised in profit or loss.
Equipment (mainly 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 to 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
2016
Rm
2015
Rm
2016
Rm
2015
Rm
Commercial property
Residential property
Total land and buildings
Market-comparable
approach and discounted
cashflow
Market-comparable
approach and replacement
value
Income capitalisation rates
(2015: 8,0% – 13,5%)
820
880
4 723
4 877
8,0% – 13,5%
Price per square metre
5
825
5
885
10
4 733
10
4 887
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 089m (2015: R3 265m).
82
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
G1 Property and equipment (continued)
Gross carrying amount
Balance at 1 January
Transfers from furniture and other equipment and buildings
Acquisitions
Disposals
Increases arising from revaluations¹
Transfers to non-current assets held for sale
Writeoff of accumulated depreciation on revaluations
Effect of movements in foreign exchange rates and other
movements
Balance at 31 December
Balance at 1 January
Accumulated depreciation and impairment losses
Transfers from furniture and other equipment and buildings
Depreciation charge for the year
Transfers to non-current assets held for sale
Writeoff of accumulated depreciation on revaluations
Effect of movements in foreign exchange rates and other
Disposals
movements
Balance at 31 December
Carrying amount
At 1 January
At 31 December
recognised in profit or loss.
2015
Rm
4 221
1 683
459
146
(144)
(128)
402
875
316
(128)
(115)
1 350
3 819
4 887
356
56
(162)
(150)
(86)
3
1 350
368
(7)
(86)
(103)
(1)
1 521
¹
Gains on property revaluations are recognised in profit or loss to the extent that they reverse a revaluation decrease of the same asset previously
Equipment (mainly 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 to 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:
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.
R3 089m (2015: R3 265m).
If land and buildings were carried under the cost and not the revaluation model, the carrying amount would have been
Land
Buildings
Computer equipment
Furniture and other
equipment
Vehicles
Total
2016
Rm
2015
Rm
2016
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
2016
Rm
2015
Rm
885
873
6 237
3 895
3 083
2 252
895
874
226
3 840
(1 683)
164
27
5
1
(62)
13
1
825
(1)
885
(139)
(67)
(76)
(83)
(4)
6 254
6 237
4 646
3 895
2 388
(5)
5
(14)
2 405
2 039
1 408
599
428
211
14
2 252
2 126
(875)
222
28
19
3
–
–
885
825
873
885
4 887
4 733
(137)
(64)
(70)
(70)
(4)
(2)
2
(9)
5
2 865
2 405
1 540
1 408
1 490
1 781
1 044
1 490
844
848
1 714
844
18
8
10
24
13 296
–
1 482
57
(224)
(369)
(86)
12 041
–
1 501
159
–
(294)
(128)
(15)
17
14 141
13 296
5 182
4 582
–
1 181
(7)
(86)
(314)
(12)
5 944
8 114
8 197
–
969
–
(128)
(249)
8
5 182
7 459
8 114
4
(1)
27
15
3
1
19
9
8
Type of property
Valuation method
Significant inputs
Parameters
2016
Rm
2015
Rm
2016
Rm
2015
Rm
Commercial property
Residential property
Total land and buildings
Market-comparable
approach and discounted
cashflow
Market-comparable
approach and replacement
value
Income capitalisation rates
8,0% – 13,5%
(2015: 8,0% – 13,5%)
820
880
4 723
4 877
Price per square metre
5
825
5
885
10
4 733
10
4 887
Nedbank Limited – Annual Report 2016
83
G2
INTANGIBLE ASSETS
Accounting policy
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 identifiable net assets recognised. If, after reassessment, the group’s interest in the
net fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred plus the amount
of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest (if any),
this excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill is not amortised, but is tested for impairment at least once a year. Any impairment loss is recognised
immediately in profit or loss and is not subsequently reversed.
On disposal of a subsidiary the goodwill attributable to the subsidiary is included in the determination of the profit or
loss on disposal.
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 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 tested annually for
impairment. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its
recoverable amount. Impairment losses that are recognised in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to a CGU and then to reduce the carrying amount of the other assets in the CGU on a
pro rata basis. However, the carrying amount of these other assets may not be reduced below the highest of its fair
value less costs to sell, its value in use and zero.
Impairment testing procedures
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value in use. The fair value less cost
to sell is determined by ascertaining the current market value of an asset (or the CGU) and deducting any costs related
to the realisation of the asset.
In assessing value in use the expected future cashflows from the CGU are discounted to their present value using a
discount rate that reflects current market assessments of the time value of money and the risks specific to the
particular CGU.
Impairment losses relating to goodwill are not reversed and all impairment losses are recognised in capital and non-
trading items for the period.
Computer software and capitalised development costs
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, and expenditure on internally generated goodwill and brands are recognised as an expense in profit or
loss for the period.
If costs can be reliably measured and future economic benefits are available, expenditure on computer software and
other development activities, whereby set procedures and processes are applied to a project for the production of new or
substantially improved products and processes, is capitalised if the computer software and other developed products or
processes are technically and commercially feasible and the group has intention and sufficient resources to complete
development. The expenditure capitalised includes the cost of materials and directly attributable employee and other
direct costs. Computer development expenditure is amortised only once the relevant software is available for use in the
manner intended by management. Capitalised software is stated at cost less accumulated amortisation and
impairment losses. Expenditure for the development of computers that are not yet available for use is not amortised and
is stated at cost less impairment losses.
Amortisation of computer software and development costs is charged to profit or loss on a straight-line basis over the
estimated useful lives of these assets, which do not exceed five years and are reviewed annually. Subsequent expenditure
relating to computer software is capitalised only when it increases the future economic benefits embodied in the specific
asset, in its current condition, to which it relates. All other subsequent expenditure is recognised as an expense in the
period in which it is incurred. The profit or loss on the disposal of computer software is recognised in non-trading and
capital items (in profit or loss). The profit or loss on disposal is the difference between the net proceeds received and the
carrying amount of the asset.
The amortisation methods and residual values of these intangible assets are reviewed annually.
84
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Key assumptions concerning the future and key sources of estimation
Goodwill
Management considers at least annually whether the current carrying value of goodwill is to be impaired. The first step
of the impairment review process requires the identification of independent CGUs by segmenting the group business into
as many largely independent income streams as is reasonably practicable. The goodwill is then allocated to these
independent units. The first element of this allocation is based on the areas of the business expected to benefit from the
synergies derived from the acquisition. The second element reflects the allocation of the net assets acquired and the
difference between the consideration paid for those net assets and their fair value. This allocation is reviewed following
business reorganisation. The carrying value of the unit, including the allocated goodwill, is compared with its fair value or
VIU 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 2016
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.
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.
■ 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.
■ 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.
Nedbank Limited – Annual Report 2016
85
G2
Intangible assets (continued)
Rm
2016
Cost
Goodwill
Software
Software
development
costs
Balance at the beginning of the year
1 633
Acquisitions
Development costs commissioned to software
Impairment losses
Disposals and retirements
Foreign currency translation and other movements
8 361
464
1 084
(89)
(105)
(6)
1 299
1 548
(1 084)
(56)
(130)
Total
11 293
2 012
-
(145)
(235)
(6)
Balance at the end of the year
1 633
9 709
1 577
12 919
Accumulated amortisation and impairment losses
Balance at the beginning of the year
224
6 053
135
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
2015
Cost
784
(69)
(6)
(130)
224
6 762
5
1 409
1 409
2 308
2 947
1 164
1 572
Balance at the beginning of the year
1 633
7 629
Acquisitions
Development costs commissioned to software
Impairment losses
Disposals and retirements
Foreign currency translation and other movements
149
621
(42)
(2)
6
957
1 032
(621)
(68)
(1)
6 412
784
(199)
(6)
6 991
4 881
5 928
10 219
1 181
-
(110)
(2)
5
Balance at the end of the year
1 633
8 361
1 299
11 293
Accumulated amortisation and impairment losses
Balance at the beginning of the year
224
Amortisation charge
Disposals and retirements
Foreign currency translation and other movements
5 344
705
(2)
6
135
5 703
705
(2)
6
Balance at the end of the year
Carrying amount
At the beginning of the year
At the end of the year
¹ Represents amounts less than R1m.
224
6 053
135
6 412
1 409
1 409
2 285
2 308
822
1 164
4 516
4 881
86
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
G2.1 Analysis of goodwill by segment
Nedbank Corporate and Investment Banking
Nedbank Retail and Business Banking
Other
2016
Rm
776
629
4
2015
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 to the estimated value in use. The VIU 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 VIU of the various CGUs were based on the following assumptions:
Risk-free rate (%)
Beta range
Equity risk premium (%)
Terminal growth rate range (%)
Cashflow projection (years)
Discount rate range (%)
Goodwill on a geographical basis relates to SA in total and is as follows:
Carrying amount
Estimated value in use
Net estimated recoverable amounts
2016
8,96
2015
9,76
0,21 – 0,81
0,30 – 0,76
6,00
6,00
0,00 – 6,60
0,00 – 4,80
4
5
9,39 – 13,84
9,80 – 14,33
2016
Rm
2015
Rm
1 409
77 709
1 409
84 497
76 300
83 088
Nedbank Limited – Annual Report 2016
87
SECTION H: OTHER ASSETS
Long-term employee benefits
H1
Accounting policy
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 OCI. 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.
Key assumptions concerning the future and key sources of estimation
The group provides pension plans for employees. Arrangements for staff retirement benefits vary from country to
country and are made in accordance with local regulations and customs.
For defined-benefit schemes, including postretirement medical aid schemes, actuarial valuation of each of the scheme’s
obligations using the projected-unit credit method and the fair valuation of each of the scheme’s assets are performed
annually in accordance with the requirements of IAS 19: 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.
88
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
POSTEMPLOYMENT AND OTHER 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 2016.
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 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 be used only 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.
H1.1 Analysis of long-term employee benefit assets and liabilities
Rm
2016
Postemployment benefits
Other long-term employee benefits – disability fund
2015
Postemployment benefits
Other long-term employee benefits – disability fund
Notes
Assets
Liabilities
H1.1.1
H1.1.1
4 633
409
5 042
4 512
373
4 885
(2 919)
(409)
(3 328)
(2 636)
(373)
(3 009)
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 R409m (2015: R373m). The value of the OMART asset held by the group is R409m
(2015: R373m).
Nedbank Limited – Annual Report 2016
89
Rm
Long-term employee benefits (continued)
H1
H1.1 Analysis of long-term employee benefit assets and
Pension and
provident
funds
Medical aid
funds
Total
liabilities (continued)
H1.1.1 Net asset/(liability) recognised
2016
Present value of defined-benefit obligation
Fair value of plan assets¹
Funded status
Unrecognised due to paragraph 64 limit
Asset
Liability
2015
Present value of defined-benefit obligation
Fair value of plan assets¹
Funded status
Unrecognised due to paragraph 64 limit
Asset
Liability
(4 954)
7 485
2 531
(27)
2 504
3 291
(787)
(5 065)
7 576
2 511
(57)
2 454
3 258
(804)
(2 133)
1 343
(790)
(790)
1 342
(2 132)
(1 832)
1 254
(578)
(578)
1 254
(1 832)
(7 087)
8 828
1 741
(27)
1 714
4 633
(2 919)
(6 897)
8 830
1 933
(57)
1 876
4 512
(2 636)
¹
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 R784m (2015: R781m) and for
medical aid to the value of R1 342m (2015: R1 254m).
H1.1.2 Postemployment benefits
Rm
Analysis of postemployment benefit assets and
liabilities
2016
Pension funds
Nedgroup Fund
Nedbank UK Fund
Other funds
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
Total
2015
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)
4 954
4 370
381
203
2 133
1 996
137
7 485
6 876
404
205
1 343
1 343
7 087
8 828
5 065
4 434
461
170
1 832
1 705
127
6 897
7 576
6 890
487
199
1 254
1 254
8 830
2 531
2 506
23
2
(790)
(653)
(137)
1 741
2 511
2 456
26
29
(578)
(451)
(127)
1 933
(27)
(23)
(4)
–
(27)
(57)
(26)
(31)
–
2 504
2 506
–
(2)
(790)
(653)
(137)
1 714
2 454
2 456
–
(2)
(578)
(451)
(127)
(57)
1 876
90
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
Present value of defined-benefit obligation
2016
Balance at the beginning of the year
Current service cost
Past service cost – vested benefit
Interest cost
Contributions by plan participants
Actuarial (losses)/gains
Benefits paid
Impact of foreign currency exchange rate changes
Balance at the end of the year
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
Fair value of plan assets
2016
Balance at the beginning of the year
Expected return on plan assets
Actuarial losses
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
2015
Balance at the beginning of the year
Expected return on plan assets
Actuarial gains/(losses)
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
5 065
27
6
465
10
(113)
(371)
(135)
1 832
74
202
97
(72)
Total
6 897
101
6
667
10
(16)
(443)
(135)
4 954
2 133
7 087
5 024
34
384
10
(142)
(339)
94
1 772
75
165
(113)
(67)
6 796
109
549
10
(255)
(406)
94
5 065
1 832
6 897
7 576
715
(610)
37
10
(371)
(13)
141
1 254
8 830
135
(40)
66
(72)
850
(650)
103
10
(443)
(13)
141
7 485
1 343
8 828
7 053
543
184
36
10
(339)
(10)
99
1 170
106
(14)
58
(66)
8 223
649
170
94
10
(405)
(10)
99
7 576
1 254
8 830
Nedbank Limited – Annual Report 2016
91
Rm
Long-term employee benefits (continued)
H1
H1.1 Analysis of long-term employee benefit assets and
Pension and
provident
funds
Medical aid
funds
Total
liabilities (continued)
H1.1.2 Postemployment benefits (continued)
Net (income)/expense recognised
2016
Current service cost
Interest (received)/cost
Scheme-settled plan administration costs
Past service cost
Effect of application of asset ceiling
2015
Current service cost
Interest (received)/cost
Scheme-settled plan administration costs
Movements in net asset/(liability) recognised
2016
Balance at the beginning of the year
Net income/(expense) recognised in the statement of comprehensive income
Net remeasurements – debit for the year
Contributions paid by the employer
Impact of foreign currency exchange rate changes
Balance at the end of the year
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
Distribution of plan assets (%)
2016
Equity instruments
Debt instruments
Property
Cash
International
Other
2015
Equity instruments
Debt instruments
Property
Cash
International
Other
Actual return on plan assets (Rm)
2016
2015
92
Nedbank Limited – Annual Report 2016
74
67
27
(250)
13
6
2
(202)
141
34
(159)
10
(115)
2 454
202
(462)
37
273
75
59
134
(578)
(141)
(137)
66
2 504
(790)
2 009
115
289
36
5
(602)
(134)
99
59
101
(183)
13
6
2
(61)
109
(100)
10
19
1 876
61
(599)
103
273
1 714
1 407
(19)
388
95
5
2 454
(578)
1 876
33,32
34,31
5,57
3,66
23,12
23,00
7,00
3,00
49,00
15,00
3,00
99,98
100,00
32,14
27,23
5,07
6,08
29,48
23,00
7,00
3,00
49,00
15,00
3,00
31,75
30,16
5,18
10,55
21,89
0,46
99,99
30,84
24,36
4,78
12,17
27,42
0,43
100,00
100,00
100,00
105
727
95
92
200
819
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Principal actuarial assumptions (%)
2016
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)
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)
Range
Used in
valuation
2,80 – 9,30
9,80 – 9,80
2,80 – 9,30
9,80
2,35 – 6,70
6,70 – 6,70
7,70 – 8,70
0,54 – 6,70
6,70
–
8,20 – 8,20
55 – 65
60
3,70 – 10,10
3,70 – 10,10
2,10 – 7,70
8,70 – 8,70
0,49 – 7,70
55 to 65
10,8
10,8
7,9
7,9
8,9
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
2016
8,95
8,95
7,07
6,29
2015
9,69
9,69
7,92
7,14
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.
Experience adjustments on present value of defined-benefit obligation for the past five years (Rm)
2016
2015
2014
2013
2012
2011
Experience adjustments on fair value of plan assets for the past five years (Rm)
2016
2015
2014
2013
2012
2011
Estimate of future contributions
Contributions expected for ensuing year
(64)
(89)
55
229
10
(106)
(30)
35
(97)
113
(42)
148
18
153
(40)
(14)
(24)
28
18
(2)
(161)
24
13
377
28
47
(40)
(14)
(24)
28
18
(32)
35
Nedbank Limited – Annual Report 2016
93
Rm
Present
value
of obligation
Fair value
of plan
asset
Surplus/
(Deficit)
H1
Long-term employee benefits (continued)
Analysis of long-term employee benefits assets and
liabilities (continued)
H1.1
H1.1.2 Postemployment benefits (continued)
Fund surplus/(deficit) for past five years
Pension funds
2016
2015
2014
2013
2012
2011
Medical aid funds
2016
2015
2014
2013
2012
2011
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
H2 Non-current assets held for sale
Accounting policy
4 954
5 065
5 024
4 781
4 784
4 191
2 133
1 832
1 772
1 571
1 584
1 482
7 485
7 576
7 053
6 520
5 635
5 115
1 343
1 254
1 170
893
854
830
2 531
2 511
2 029
1 739
851
924
(790)
(578)
(602)
(678)
(730)
(652)
2016
2015
49
332
(39)
(269)
44
272
(35)
(222)
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.
Immediately before classification as held for sale, all assets and liabilities are remeasured in accordance with the group’s
accounting policies. Non-current assets (or disposal groups) held for sale are measured at the lower of the carrying
amount and fair value less incremental directly attributable cost to sell (excluding taxation and finance charges) and are
not depreciated.
Non-current assets held for sale
Previously included in
Properties sold but not yet transferred¹
Property and equipment
2016
Rm
287
287
2015
Rm
2
2
¹
Commitments for the sale of properties had been entered into at year-end by the group, transfer of which had not been effected at year-end. Transfer of
the properties is expected to take place during the following year.
H3 OTHER ASSETS
Sundry debtors and other accounts
2016
Rm
2015
Rm
8 164
8 164
3 925
3 925
94
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
SECTION I: FINANCIAL INSTRUMENTS
Accounting policy
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.
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 FVTPL 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 FVTPL are initially measured at fair value plus transaction costs that are
directly attributable to the acquisition or issue of the financial instruments.
Where the transaction price in a non-active market is different to the fair value from other observable current-market
transactions in the same instrument or based on a valuation technique, the variables of which include only data from
observable markets, the group defers such differences (day-one gains or losses). Day-one gains or losses are amortised
on a straight-line basis over the life of the financial instrument. To the extent that the inputs determining the fair value
of the instrument become observable, or on derecognition of the instrument, day-one gains or losses are recognised
immediately in profit or loss.
Categories of financial instruments
Subsequent to initial recognition, financial instruments are measured at fair value or amortised cost, depending on their
classification and whether fair value can be measured reliably:
■ Financial instruments at fair value through profit or loss
Financial instruments at FVTPL consist of instruments that are held for trading and instruments that the group has
designated, at the initial recognition date, as at FVTPL.
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 profit-taking 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 FVTPL are those
that meet any one of the following conditions:
the FVTPL designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise from measuring assets or liabilities or recognising the gains and losses on assets and liabilities on
different bases;
the instrument forms part of a group of financial instruments that is managed and its performance is evaluated
on a fair value basis, in accordance with a documented risk management or investment strategy, and information
about the group is provided internally on that basis to key management personnel, using a fair-value basis; or
a contract contains one or more embedded derivatives that require separation from the host contract or a
derivative that significantly modifies the cashflows of the host contract.
Gains or losses on financial instruments at FVTPL (excluding interest income and interest expense calculated on
the amortised-cost basis relating to interest-bearing instruments that have been designated as at FVTPL) 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 2016
95
SECTION I: FINANCIAL INSTRUMENTS (continued)
Accounting policy (continued)
■ Non-trading financial liabilities
All financial liabilities, other than those at FVTPL, 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 FVTPL or those that are AFS. 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 FVTPL, AFS 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
AFS 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 FVTPL.
AFS financial assets are measured at fair value, with fair-value gains or losses recognised in other comprehensive
income, unless the asset has been designated as a hedged item in a fair-value-hedging relationship subject to hedge
accounting. In a fair-value-hedging relationship, the portion of the fair-value gain or loss of the asset attributable to the
hedged risk is recorded in profit and loss to offset changes in the fair value of the hedging instrument. Any other changes
in the fair value of the asset attributable to aspects other than the hedged risk are 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.
Measurement basis of financial instruments
There are two bases of measurement, namely amortised cost and fair value:
■ Amortised cost
The amortised cost of a financial instrument is the amount at which the financial instrument is measured on initial
recognition minus principal repayments, plus or minus the cumulative amortisation using the effective-interest
method of any difference between the initial contractual amount and the maturity amount, less any cumulative
impairment losses.
The effective-interest method is a method of calculating the amortised cost of a financial instrument and of
allocating the interest income and expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when
appropriate, a shorter period, to the net carrying amount of the financial instrument. When calculating the effective
interest rate, cashflows are estimated considering all contractual terms of the financial instrument, but future credit
losses are not considered. The calculation includes all fees and points paid or received between parties to the contract
that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.
■ Fair value
The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
The fair value of instruments that are quoted in an active market is determined using quoted prices where they
represent those at which regularly and recently occurring transactions take place.
The group uses valuation techniques to establish the fair value of instruments where quoted prices in active markets
are not available.
For a detailed discussion of the fair value of financial instruments refer to note I2.
96
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Accounting policy (continued)
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 estimated reliably. 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 impairment loss is reversed by adjusting the allowance account. The reversal may not result in a
carrying amount of the financial asset that exceeds what the amortised cost would have been had the impairment
not been recognised at the date on which the impairment is reversed. The amount of the reversal is recognised in
profit or loss for the period.
■ Available-for-sale financial assets
When a decline in the fair value of an AFS financial asset has been recognised directly in equity, in the statement of
comprehensive income, and there is objective evidence that the asset is impaired, the cumulative loss that has been
recognised directly in equity, in the statement of comprehensive income, is removed from equity and recognised in
profit or loss. The amount of the cumulative loss that is removed from equity and recognised in profit or loss is the
difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less
any impairment loss on that financial asset previously recognised in profit or loss. Impairment losses recognised in
profit or loss for an investment in an equity instrument classified as available for sale are not reversed through profit
or loss.
If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase
can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the
impairment loss is reversed, with the amount of the reversal recognised in profit or loss for the period.
■ Maximum credit risk
Credit risk arises principally from loans and advances to clients, investment securities, derivatives and irrevocable
commitments to provide facilities. The maximum credit risk is typically the gross carrying amount, net of any offset
amounts 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.
Nedbank Limited – Annual Report 2016
97
SECTION I: FINANCIAL INSTRUMENTS (continued)
Accounting policy (continued)
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.
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.
Cash and cash equivalents
Cash and cash equivalents represents cash on hand and demand deposits and cash equivalents that 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.
98
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Key assumptions concerning the future and key sources of estimation
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 AFS. AFS financial investments are initially recognised at fair
value and are subsequently held at fair value. Gains and losses arising from changes in fair value of such assets are
included as a separate component of other comprehensive income and presented in equity.
The fair value of a financial instrument is the amount that would be received to sell the asset or paid to transfer the
liability in an orderly transaction at the measurement date between knowledgeable and 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 disclosed in note I2 to
the financial statements. In particular, the areas that involve the greatest amount of judgement and complexity include
the following:
■ Assessing whether instruments are trading with sufficient frequency and volume, that they can be considered liquid.
■ The inclusion of a measure of the counterparties’ non-performance risk in the fair-value measurement of loans and
advances, which involves the modelling of dynamic credit spreads.
■ The inclusion of credit valuation adjustment (CVA) and debit valuation adjustment (DVA) in the fair-value
measurement of derivative instruments.
■ The inclusion of own credit risk in the calculation of the fair value of financial liabilities.
These concepts are continuously developing and evolving within the context of the SA market and therefore changes in
these assumptions will arise as the market develops.
Nedbank Limited – Annual Report 2016
99
SECTION I: FINANCIAL INSTRUMENTS (continued)
Standards and interpretations issued and not yet effective
IFRS 9: Financial Instruments
IFRS 9: Financial Instruments was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition and
Measurement. The standard is effective for financial years commencing on or after 1 January 2018. 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 financial assets measured at amortised cost and fair value through
other comprehensive income (FVTOCI). 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:
■ Classification and measurement
Financial assets are to be classified based on (i) the business model within which the financial assets are managed and (ii) the
contractual cashflow characteristics of the financial assets (whether the cashflows represent ‘solely payment of principal and
interest’). Financial assets are measured at amortised cost if they are held within a business model whose objective is to hold
those assets for the purpose of collecting contractual cashflows and those cashflows comprise solely payments of principal
and interest (‘hold to collect’).
Financial assets are measured at FVTOCI if they are held within a business model whose objective is achieved by both
collecting contractual cashflows and selling financial assets, and those contractual cashflows comprise solely payments of
principal and interest (‘hold to collect and sell’). Movements in the carrying amount of these financial assets should be taken
through OCI, except for impairment gains or losses, interest revenue and foreign exchange gains or losses, which are
recognised in profit or loss. Where the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI
is reclassified from equity to profit or loss. Other financial assets are measured at FVTPL.
The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL. Changes in the
fair value of these financial liabilities which are attributable to the group’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. However, 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 FVTPL, in note I4.2.
The group currently designates certain fixed-rate assets and liabilities, which are economically hedged through interest rate
swaps, at FVTPL. This option remains available under IFRS 9. During the year the group conducted an assessment of
potential classification and measurement changes to financial assets based on the composition of the balance sheet at
31 December 2015. This may not be fully representative of the impact at 1 January 2018 as IFRS 9 requires that business
models be assessed based on facts and circumstances from the date of initial application. However, based on the
assessment of financial assets at 31 December 2015, the group does not expect the impact of the changes to classification
and measurement of financial assets to be significant to the group’s statement of financial position and performance.
Key matters arising from the assessment relate to monitoring the group’s preliminary business model conclusions and
development of the new required disclosures.
100
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Standards and interpretations issued and not yet effective (continued)
■ 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 ECL model applies to debt instruments recorded at amortised cost or at FVTOCI, 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 2016.
■ 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 macrohedging project is completed, so as to ensure that reporting entities do not have to comply with
interim measures before macrohedging rules are finalised. Until such time as this project is complete, entities can choose
between applying the hedge accounting requirements of IFRS 9 or to continue to apply the existing hedge accounting
requirements in IAS 39. The group has decided to exercise the accounting policy choice to continue IAS 39 hedge accounting
and, therefore, the group does not expect to have any significant impact on its microhedge accounting.
Nedbank Limited – Annual Report 2016
101
I1
Consolidated statement of financial position – categories of financial instruments
Notes
Total
Rm
At fair value through
profit or loss
Held for
Available-
for–sale
financial
Held–to-
maturity
Financial
liabilities at
Loans and
amortised
trading
Designated¹
assets
investments
receivables
Rm
Rm
Rm
Rm
Rm
cost
Rm
Non–
financial
assets,
liabilities
and equity
Rm
2016
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
Additional tier 1 capital instruments
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
¹ Refer to note I4 in respect of financial instruments designated as at FVTPL.
C6
C4
C7
C3
C1
H3
F1
H2
F2
B8.3
G1
H1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1
D2
20 241
68 218
18 044
50 687
691 925
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
20 241
33 184
740
22 393
602 139
8 159
33 312
18 044
19 637
29 577
5
1 722
7 917
60 209
2 350
1 477
431
18 139
900 061
100 575
73 675
1 171
55 577
648 678
–
20 385
28
19 182
42 698
61 908
3 561
2 000
253
67 722
13 469
750 319
12 717
53
391
3 328
52 062
832 339
900 061
–
–
–
–
–
–
–
–
–
–
–
67 722
–
13 469
11 781
2 612
63 754
674 784
9 127
27 862
27 862
301
64 055
64 055
–
–
–
–
51 761
735 672
735 672
–
–
440
287
225
266
8 197
5 042
5 928
28
19 182
42 698
61 908
3 561
2 000
253
978
53
391
3 328
4 750
72 472
102
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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
33 312
18 044
19 637
29 577
5
1 722
7 917
60 209
20 241
33 184
740
22 393
602 139
8 159
1 477
431
2 350
18 139
440
287
225
266
8 197
5 042
5 928
900 061
100 575
73 675
1 171
55 577
648 678
–
20 385
Total equity attributable to equity holders of the parent
–
–
–
–
–
–
28
19 182
42 698
61 908
3 561
2 000
253
I1
Consolidated statement of financial position – categories of financial instruments
Investments in private-equity associates, associate companies and joint arrangements
2016
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
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
Preference share capital and premium
Additional tier 1 capital instruments
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
¹ Refer to note I4 in respect of financial instruments designated as at FVTPL.
C6
C4
C7
C3
C1
H3
F1
H2
F2
G1
H1
C6
G2
B8.3
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1
D2
20 241
68 218
18 044
50 687
691 925
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
28
19 182
42 698
61 908
3 561
2 000
253
67 722
13 469
750 319
12 717
53
391
3 328
52 062
832 339
900 061
27 862
27 862
301
64 055
64 055
–
–
–
–
51 761
735 672
735 672
–
–
63 754
674 784
9 127
978
53
391
3 328
4 750
72 472
–
–
–
–
–
67 722
–
13 469
11 781
2 612
Nedbank Limited – Annual Report 2016
103
I1
Consolidated statement of financial position – categories of financial instruments
(continued)
Notes
Total
Rm
trading
Designated¹
assets
investments
receivables
Rm
Rm
Rm
Rm
Rm
cost
Rm
At fair value through
profit or loss
Held for
Available-
for–sale
financial
Held–to-
maturity
Financial
liabilities at
Loans and
amortised
Non-
financial
assets,
liabilities
and equity
Rm
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 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
C6
C4
C7
C3
C1
H3
F1
H2
F2
B8.3
G1
H1
C6
G2
B3.1
B3.2
C7
D1
K1.1
B8.3
H1
D2
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
18 151
32 863
3 007
18 807
9 346
30 948
9 614
32 120
12
17 869
11 305
63 084
1 154
1 631
17
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
11 424
2 910
48 330
48 330
64 993
50
401
65 444
65 444
–
–
–
–
–
59 954
631 619
6 020
–
–
–
–
44 576
682 215
682 215
–
–
904
2
246
67
8 114
4 885
4 881
19 099
28
18 532
37 610
56 170
3 561
223
931
87
763
3 009
4 790
64 744
¹ Refer to note I4 in respect of financial instruments designated as at FVTPL.
²
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
104
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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
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 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
C6
C4
C7
C3
C1
H3
F1
H2
F2
G1
H1
C6
G2
B8.3
B3.1
B3.2
C7
D1
K1.1
B8.3
H1
D2
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
¹ Refer to note I4 in respect of financial instruments designated as at FVTPL.
²
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
I1
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 arrangements
1 631
17
1 154
9 346
30 948
9 614
32 120
12
17 869
11 305
63 084
18 151
32 863
3 007
18 807
571 603
3 913
16 190
860 733
82 040
95 043
3 024
51 670
609 857
–
–
–
–
–
–
904
2
246
67
8 114
4 885
4 881
19 099
28
18 532
37 610
56 170
3 561
223
–
33 996
11 424
2 910
48 330
48 330
–
–
–
–
–
59 954
64 993
50
401
65 444
65 444
631 619
6 020
–
–
–
–
44 576
682 215
682 215
–
–
931
87
763
3 009
4 790
64 744
Nedbank Limited – Annual Report 2016
105
Fair-value measurement – financial instruments
I2
I2.1 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 to sell the asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is a
presumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its
operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would
receive or pay in a forced transaction, involuntary liquidation or distressed sale.
CONTROL ENVIRONMENT
Validation and approval
The business unit entering into the transaction is responsible for the initial determination and recording of the fair value of
the transaction. There are normalised review protocols for the independent review and validation of fair values separate from
the business unit entering into the transaction. These include, but are not limited to:
■ daily controls over the profit or loss recorded by trading and treasury frontoffice traders;
■ specific controls to ensure consistent pricing policies and procedures are adhered to;
■ independent valuation of structures, products and trades; and
■ periodic review of all elements of the modelling process.
The validation of pricing and valuation methodologies is verified by a specialist team that is part of the group’s risk
management function and that is independent of all the business units. A specific area of focus is the marking-to-model of
illiquid and/or complex financial instruments.
The review of the modelling process includes approval of model revisions, vetting of model inputs, review of model results and
more specifically the verification of risk calculations. All valuation techniques are validated and reviewed by qualified senior
staff and are calibrated and backtested 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.
■ 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 I2.7.
VALUATION METHODOLOGIES
The objective of a fair-value measurement is to estimate the price at which an orderly transaction to sell the asset or to
transfer the liability would take place between market participants at the measurement date under current market
conditions. A fair-value measurement includes, but is not limited to, consideration of the following:
■ The particular asset or liability that is being measured (consistently with its unit of account).
■ The principal (or most advantageous) market for the asset or liability.
■ 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.
106
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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.
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 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.
Nedbank Limited – Annual Report 2016
107
Fair-value measurement – financial instruments (continued)
I2
I2.1 Valuation of financial instruments (continued)
OBSERVABLE MARKETS (continued)
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.
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 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.
108
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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 FVTPL 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 OCI.
■ 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 through an exchange or over the counter (OTC) and are valued using market-
standard models and quoted parameter inputs. Parameter inputs are obtained from pricing services, consensus pricing
services and recently occurring transactions in active markets, whenever possible. Certain inputs may not be observable in
the market directly, but can be determined from observable prices through model calibration procedures. Other inputs are
not observable, but can generally be estimated from historical data or other sources.
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,
depending 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.
Nedbank Limited – Annual Report 2016
109
Fair-value measurement – financial instruments (continued)
I2
I2.1 Valuation of financial instruments (continued)
VALUATION TECHNIQUES BY INSTRUMENT (continued)
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 FVTPL.
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 transactions 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 middle-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.
110
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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
Valuation technique
Key inputs
Other short-term securities
Discounted-cashflow model
Derivative financial instruments
Discounted-cashflow model
Discount rates
Discount rates
Black-Scholes model
Risk-free rate and volatilities
Multiple valuation techniques
Valuation multiples
Government and other securities
Discounted-cashflow model
Loans and advances
Investment securities
Discounted-cashflow model
Discounted-cashflow model
Adjusted net asset value
Dividend yield method
Discount rates
Interest rate curves
Money market rates and interest rates
Underlying price of market-traded
instruments
Dividend growth rates
Liabilities
Derivative financial instruments
Discounted-cashflow model
Discount rates
Black-Scholes model
Risk-free rate and volatilities
Multiple valuation techniques
Valuation multiples
Amounts owed to depositors
Discounted-cashflow model
Provisions and other liabilities
Discounted-cashflow model
Long-term debt instruments
Discounted-cashflow model
Discount rates
Discount rates
Discount rates
SUMMARY OF PRINCIPAL VALUATION TECHNIQUES – LEVEL 3 INSTRUMENTS
The summary of the valuation techniques applicable to those financial assets and financial liabilities classified as level 3 in the
fair-value hierarchy is set out in note I2.7.
Nedbank Limited – Annual Report 2016
111
Fair-value measurement (continued)
I2
I2.2 Fair-value hierarchy
I2.2.1 Financial assets
Rm
2016
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Investments in private-equity associates, associate companies and
joint arrangements
Investment securities
2015
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Investments in private-equity associates, associate companies and
joint arrangements
Investment securities
Summary of fair-value hierarchies
Rm
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Total
financial
assets
recognised
at amortised
cost
Total
financial
assets
recognised
at fair value
Total
financial
assets
Note
Held for trading
Available for sale
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
879 676
704 255
175 421
15 418
85 132
25
560
70 007
3 108
–
761
410
C6
C4
C7
C3
C1
H3
F2
F1
C6
C4
C7
C3
C1
H3
F2
F1
38 380
68 218
18 044
50 687
38 380
33 184
22 393
691 925
602 139
8 164
8 159
2 350
1 908
–
35 034
18 044
28 294
89 786
5
2 350
1 908
841 634
661 527
180 107
7 587
74 435
18
34 341
32 863
18 807
571 603
3 913
34 341
60 078
30 948
42 733
666 807
3 925
1 154
1 648
–
27 215
30 948
23 926
95 204
12
1 154
1 648
Investments in private-equity associates, associate companies and joint arrangements
Investment securities
Reconciliation to categorised statement of financial position
Rm
Level 1
Level 2
Level 3
Reconciliation to statement of financial position
Rm
Total financial assets
Total non-financial assets
Total assets
112
Nedbank Limited – Annual Report 2016
15 340
37
36
5
33 275
17 983
4 297
29 577
25
541
9 346
30 844
2 125
32 120
86
7 489
12
18
3 750
1 722
7 376
60 132
17 869
7 555
63 051
77
2 350
681
1 877
33
1 154
690
740
3 007
19
4 182
777
88 984
–
21
3 024
410
–
432
509
17
Total financial assets
Total financial assets
Total financial assets
Total financial assets
recognised at fair value
classified as level 1
classified as level 2
classified as level 3
2016
2015
2016
2015
2016
2015
2016
2015
35 034
18 044
28 294
89 786
5
2 350
1 908
27 215
30 948
23 926
95 204
12
1 154
1 648
37
36
15 881
5
19
34 997
17 983
12 413
89 709
27 215
30 844
12 687
95 171
86
11 239
12
432
798
526
175 421
180 107
15 978
11 769
155 900
166 443
25
77
2 350
1 091
3 543
18
33
1 154
690
1 895
Held for trading
through profit or loss
Available for sale
Designated at fair value
2016
2015
2015
2016
2015
15 418
85 132
25
7 587
74 435
18
100 575
82 040
2016
560
70 007
3 108
73 675
4 182
88 984
1 877
95 043
761
410
1 171
3 024
3 024
Note
2016
2015
I1
I1
879 676
20 385
841 634
19 099
900 061
860 733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Total
financial
assets
Total
financial
assets
Total
recognised
financial
at amortised
recognised
Note
assets
cost
at fair value
C6
C4
C7
C3
C1
H3
F2
F1
C6
C4
C7
C3
C1
H3
F2
F1
38 380
68 218
18 044
50 687
38 380
33 184
22 393
691 925
602 139
8 164
8 159
2 350
1 908
34 341
60 078
30 948
42 733
666 807
3 925
1 154
1 648
34 341
32 863
18 807
571 603
3 913
–
35 034
18 044
28 294
89 786
5
2 350
1 908
–
27 215
30 948
23 926
95 204
12
1 154
1 648
I2
Fair-value measurement (continued)
I2.2 Fair-value hierarchy
I2.2.1 Financial assets
Rm
2016
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
joint arrangements
Investment securities
2015
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
joint arrangements
Investment securities
Summary of fair-value hierarchies
Rm
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Investment securities
Investments in private-equity associates, associate companies and
Investments in private-equity associates, associate companies and joint arrangements
Reconciliation to categorised statement of financial position
Rm
Level 1
Level 2
Level 3
Rm
Reconciliation to statement of financial position
Total financial assets
Total non-financial assets
Total assets
879 676
704 255
175 421
15 418
85 132
25
560
70 007
3 108
–
761
410
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Held for trading
Designated at fair value
through profit or loss
Available for sale
Investments in private-equity associates, associate companies and
841 634
661 527
180 107
7 587
74 435
18
19
4 182
777
88 984
37
36
15 340
5
33 275
17 983
4 297
29 577
25
541
1 722
7 376
60 132
9 346
30 844
2 125
32 120
86
7 489
12
18
3 750
17 869
7 555
63 051
432
509
77
2 350
681
1 877
33
1 154
690
740
–
21
3 024
410
–
3 007
17
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
2016
2015
2016
2015
2016
2015
2016
2015
35 034
18 044
28 294
89 786
5
2 350
1 908
27 215
30 948
23 926
95 204
12
1 154
1 648
37
36
15 881
5
19
34 997
17 983
12 413
89 709
27 215
30 844
12 687
95 171
86
11 239
12
432
798
526
175 421
180 107
15 978
11 769
155 900
166 443
25
77
2 350
1 091
3 543
18
33
1 154
690
1 895
Held for trading
2016
2015
15 418
85 132
25
7 587
74 435
18
100 575
82 040
Designated at fair value
through profit or loss
Available for sale
2016
560
70 007
3 108
73 675
2015
2016
2015
4 182
88 984
1 877
95 043
761
410
1 171
3 024
3 024
Note
2016
2015
I1
I1
879 676
20 385
841 634
19 099
900 061
860 733
Nedbank Limited – Annual Report 2016
113
Fair-value measurement (continued)
I2
I2.2 Fair-value hierarchy (continued)
I2.2.2 Financial liabilities
Rm
2016
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
2015
Derivative financial instruments
Amounts owed to depositors¹
Provisions and other liabilities
Long-term debt instruments
Total
financial
liabilities
recognised
at amortised
cost
Total
financial
liabilities
recognised
at fair value
Total
financial
liabilities
Note
C7
D1
K1.1
D2
C7
D1
K1.1
D2
827 589
735 672
13 469
750 319
674 784
11 739
52 062
9 127
51 761
795 989
682 215
33 996
708 036
8 980
44 977
631 619
6 020
44 576
91 917
13 469
75 535
2 612
301
113 774
33 996
76 417
2 960
401
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
Summary of fair-value hierarchies
Rm
Derivative financial instruments
Amounts owed to depositors¹
Provisions and other liabilities
Long-term debt instruments
Total financial liabilities
recognised at fair value
2016
2015
13 469
75 535
2 612
301
33 996
76 417
2 960
401
91 917
113 774
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
Reconciliation to categorised statement of financial position
Rm
Level 1
Level 2¹
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
Reconciliation to statement of financial position
Rm
Total financial liabilities
Total equity and non-financial liabilities
Total equity and liabilities
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 accesible 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.
Nedbank Limited – Annual Report 2016
114
Held for trading
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
–
–
–
64 055
63 754
301
64 993
50
245
156
65 288
156
–
–
Total financial liabilities
Total financial liabilities
Total financial liabilities
classified as level 1
classified as level 2
classified as level 3
2016
2015
2016
2015
2 246
11
2 235
2 870
126
2 744
2016
11
2 235
2 246
25 616
13 458
11 781
377
45 460
33 870
11 424
166
2015
126
2 744
156
3 026
13 458
75 535
377
301
33 870
76 417
216
245
89 671
110 748
–
–
Held for trading
through profit or loss
Designated at fair value
2016
2015
2016
2 246
25 616
27 862
2 870
45 460
48 330
64 055
64 055
2015
156
65 288
65 444
Note
2016
2015
I1
I1
827 589
795 989
72 472
64 744
900 061
860 733
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Total
financial
liabilities
Total
financial
liabilities
Total
recognised
financial
at amortised
recognised
Note
liabilities
cost
at fair value
827 589
735 672
750 319
674 784
795 989
682 215
C7
D1
K1.1
D2
C7
D1
K1.1
D2
13 469
11 739
52 062
33 996
708 036
8 980
44 977
9 127
51 761
631 619
6 020
44 576
91 917
13 469
75 535
2 612
301
113 774
33 996
76 417
2 960
401
Total financial liabilities
recognised at fair value
2016
2015
13 469
75 535
2 612
301
33 996
76 417
2 960
401
91 917
113 774
I2
Fair-value measurement (continued)
I2.2 Fair-value hierarchy (continued)
I2.2.2 Financial liabilities
Rm
2016
2015
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
Derivative financial instruments
Amounts owed to depositors¹
Provisions and other liabilities
Long-term debt instruments
Summary of fair-value hierarchies
Rm
Derivative financial instruments
Amounts owed to depositors¹
Provisions and other liabilities
Long-term debt instruments
Rm
Level 1
Level 2¹
Rm
Reconciliation to statement of financial position
Total financial liabilities
Total equity and non-financial liabilities
Total equity and liabilities
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
Reconciliation to categorised statement of financial position
¹
Amounts owed to depositors of R93 079m were included in the previous year as held-for-trading liabilities, whereas these instruments were classified and
measured as financial liabilities at amortised cost. Accordingly, the held-for-trading and financial liabilities at amortised cost categories have been
restated to reflect the correct classification.
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 accesible 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.
Held for trading
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
2 246
11
2 235
2 870
126
2 744
25 616
13 458
11 781
377
45 460
33 870
11 424
166
–
–
–
64 055
63 754
301
156
65 288
64 993
50
245
156
–
–
Total financial liabilities
classified as level 1
Total financial liabilities
classified as level 2
Total financial liabilities
classified as level 3
2016
11
2 235
2 246
2015
126
2 744
156
3 026
2016
2015
2016
2015
13 458
75 535
377
301
33 870
76 417
216
245
89 671
110 748
–
–
Held for trading
Designated at fair value
through profit or loss
2016
2015
2016
2 246
25 616
27 862
2 870
45 460
48 330
64 055
64 055
2015
156
65 288
65 444
Note
2016
2015
I1
I1
827 589
795 989
72 472
64 744
900 061
860 733
Nedbank Limited – Annual Report 2016
115
Fair-value measurement (continued)
I2
I2.3 Details of changes in valuation techniques
There have been no changes to valuation techniques.
I2.4 Significant transfers between level 1 and level 2
There were no significant transfers between level 1 and level 2 of the fair-value hierarchy during 2016.
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.
–
40
40
410
410
450
–
–
–
–
1 183
(242)
1 130
(208)
53
–
(34)
–
1 183
(242)
–
–
305
304
1
305
(212)
(137)
(75)
(212)
–
–
–
–
–
–
–
–
Closing
25
25
3 108
2 350
77
681
410
410
3 543
Closing
18
18
1 877
1 154
33
690
1 895
Purchases
Sales and
Transfers
Transfers to
balance at
and issues
settlements
from level 2
level 2
31 December
Opening
balance at
1 January
Gains/
(Losses)
in profit for
the year
Gains in other
comprehen-
sive income
for the year
Purchases
Sales and
Transfers
Transfers to
balance at
and issues
settlements
from level 2
level 2
31 December
I2.5 Level 3 reconciliation
ASSETS
Rm
2016
Held for trading
Derivative financial instruments
Designated as at fair value
Investments in private-equity associates, associate companies and joint
arrangements
Loans and advances
Investment securities
Available for sale
Investment securities
18
18
7
7
1 877
250
1 154
33
690
–
274
4
(28)
–
–
–
–
–
Total financial assets classified as level 3
1 895
257
Rm
2015
Held for trading
Derivative financial instruments
Designated as at fair value
Investments in private-equity associates, associate companies and joint
arrangements
Loans and advances
Investment securities
Total financial assets classified as level 3
Opening
balance at
1 January
Gains/
(Losses)
in profit for
the year
Gains in other
comprehen-
sive income
for the year
–
1 731
898
33
800
1 731
18
18
53
89
(36)
71
–
–
–
Gains and losses include, but are not limited to, fair-value gains or losses, translation gains or losses and trading gains
or losses.
116
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2
Fair-value measurement (continued)
I2.3 Details of changes in valuation techniques
There have been no changes to valuation techniques.
I2.4 Significant transfers between level 1 and level 2
There were no significant transfers between level 1 and level 2 of the fair-value hierarchy during 2016.
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.
I2.5 Level 3 reconciliation
ASSETS
Rm
2016
Held for trading
Derivative financial instruments
Designated as at fair value
arrangements
Loans and advances
Investment securities
Available for sale
Investment securities
Gains/
Gains in other
Opening
(Losses)
comprehen-
balance at
in profit for
sive income
1 January
the year
for the year
Purchases
and issues
Sales and
settlements
Transfers
from level 2
Transfers to
level 2
Closing
balance at
31 December
Investments in private-equity associates, associate companies and joint
1 877
250
–
–
1 183
(242)
1 130
(208)
53
–
(34)
–
Total financial assets classified as level 3
1 895
257
1 183
(242)
–
40
40
410
410
450
–
–
–
–
25
25
3 108
2 350
77
681
410
410
3 543
Rm
2015
Held for trading
Derivative financial instruments
Designated as at fair value
arrangements
Loans and advances
Investment securities
Total financial assets classified as level 3
Investments in private-equity associates, associate companies and joint
Gains and losses include, but are not limited to, fair-value gains or losses, translation gains or losses and trading gains
or losses.
Gains/
Gains in other
Opening
(Losses)
comprehen-
balance at
in profit for
sive income
1 January
the year
for the year
Purchases
and issues
Sales and
settlements
Transfers
from level 2
Transfers to
level 2
Closing
balance at
31 December
–
–
305
304
1
305
(212)
(137)
(75)
(212)
–
–
–
–
–
–
18
18
1 877
1 154
33
690
1 895
18
18
1 154
33
690
–
–
1 731
898
33
800
1 731
7
7
274
(28)
4
–
18
18
53
89
(36)
71
–
–
–
–
–
–
–
Nedbank Limited – Annual Report 2016
117
I2
Fair-value measurement
I2.6 Unrealised gains or losses
The unrealised gains or losses arising on instruments classified as level 3 include the following:
Trading income
Private-equity gains
2016
Rm
257
257
2015
Rm
71
71
I2.7 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:
Valuation technique
Significant unobservable
input
%
Variance in fair value
financial position
change in value
change in value
Favourable
Unfavourable
Rm
Rm
Amount recognised
in the statement of
2016
Assets
Derivative financial instruments
Loans and advances
Investment securities
Discounted cashflows
Discount rates, EBITDA
Discounted cashflows
Discounted cashflows,
adjusted net asset
value, earnings
multiples, third-party
valuations, dividend
yields
Credit spreads and
discount rates
Valuation multiples,
correlations, volatilities
and credit spreads
between (12) and 9
between (12) and 9
between (12) and 9
1 091
Investments in private-equity associates, associate companies
and joint arrangements
Discounted cashflows,
earnings multiples
Valuation multiples
between (12) and 9
Total financial assets classified as level 3
Valuation technique
unobservable input
%
Significant
Variance in fair value
financial position
change in value
change in value
Amount recognised
in the statement of
Favourable
Unfavourable
2015
Assets
Derivative financial instruments
Loans and advances
Investment securities
Discounted-cashflow
model, Black-Scholes
model and multiple
valuation techniques
Discounted cashflows
Discounted cashflows,
adjusted net asset value,
earnings multiples,
third-party valuations,
dividend yields
Discount rates, risk-free
rates, volatilities, credit
spreads and valuation
multiples
Credit spreads and
discount rates
Valuation multiples,
correlations, volatilities
and credit spreads
between (13) and 10
between (13) and 10
between (13) and 10
Investments in private-equity associates, associate companies
and joint arrangements
Discounted cashflows,
earnings multiples
Valuation multiples
between (7) and 8
Total financial assets classified as level 3
118
Nedbank Limited – Annual Report 2016
Rm
25
77
2 350
3 543
Rm
18
33
690
1 154
1 895
2
7
103
221
333
Rm
2
3
62
96
163
(3)
(9)
(129)
(278)
(419)
Rm
(2)
(4)
(77)
(108)
(191)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2
Fair-value measurement
I2.6 Unrealised gains or losses
The unrealised gains or losses arising on instruments classified as level 3 include the following:
Trading income
Private-equity gains
2016
Rm
257
257
2015
Rm
71
71
I2.7 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:
Valuation technique
input
Significant unobservable
Variance in fair value
%
Amount recognised
in the statement of
financial position
Rm
Favourable
change in value
Rm
Unfavourable
change in value
Rm
2016
Assets
Derivative financial instruments
Loans and advances
Investment securities
Discounted cashflows,
Valuation multiples,
between (12) and 9
Discounted cashflows
Discount rates, EBITDA
Discounted cashflows
Credit spreads and
discount rates
between (12) and 9
between (12) and 9
adjusted net asset
value, earnings
multiples, third-party
valuations, dividend
yields
correlations, volatilities
and credit spreads
Investments in private-equity associates, associate companies
Discounted cashflows,
Valuation multiples
between (12) and 9
and joint arrangements
earnings multiples
Total financial assets classified as level 3
25
77
1 091
2 350
3 543
2
7
103
221
333
(3)
(9)
(129)
(278)
(419)
Valuation technique
unobservable input
Significant
Variance in fair value
%
Amount recognised
in the statement of
financial position
Rm
Favourable
change in value
Rm
Unfavourable
change in value
Rm
2015
Assets
Derivative financial instruments
Loans and advances
Investment securities
between (13) and 10
Discounted cashflows
Credit spreads and
between (13) and 10
between (13) and 10
Discounted-cashflow
model, Black-Scholes
model and multiple
valuation techniques
Discount rates, risk-free
rates, volatilities, credit
spreads and valuation
multiples
discount rates
Discounted cashflows,
Valuation multiples,
adjusted net asset value,
correlations, volatilities
and credit spreads
earnings multiples,
third-party valuations,
dividend yields
Investments in private-equity associates, associate companies
Discounted cashflows,
Valuation multiples
between (7) and 8
and joint arrangements
earnings multiples
Total financial assets classified as level 3
18
33
690
1 154
1 895
2
3
62
96
163
(2)
(4)
(77)
(108)
(191)
Nedbank Limited – Annual Report 2016
119
I3
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:
Financial liabilities
Long-term debt instruments
51 761
51 761
48 880
48 880
20 432
20 432
28 448
28 448
Rm
2016
Financial assets
Other short-term securities
Government and other securities
Loans and advances
Rm
2015
Financial assets
Other short-term securities
Government and other securities
Loans and advances
Carrying
value
Fair
value
Level 1
Level 2
Level 3
657 716
648 545
21 828
33 184
22 393
33 128
21 828
602 139
593 589
21 828
33 128
33 128
593 589
593 589
–
Carrying
value
Fair
value
Level 1
Level 2
Level 3
623 273
618 012
17 415
32 863
18 807
32 709
17 415
571 603
567 888
17 415
32 709
32 709
567 888
567 888
–
Financial liabilities
Long-term debt instruments
44 576
44 576
42 933
42 933
24 269
24 269
18 664
18 664
Loans and advances
Loans and advances, recognised in note C1, 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 the periods 2017 to 2019 (2015: for periods 2016 to 2018) are based on the latest
available internal data and are 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.
120
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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 C3 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 C4 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 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.
I4
Financial instruments designated as at fair value through profit or loss
The group has satisfied the criteria for designation of financial instruments as at FVTPL 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 Asset and Liability Committee (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 FVTPL and are held at fair value.
Various instruments are designated as at FVTPL, 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.
Nedbank Limited – Annual Report 2016
121
Financial instruments designated as at fair value through profit or loss (continued)
I4
I4.1 Financial assets designated as at fair value through profit or loss
Maximum exposure
to credit risk
Change in fair value due to change in credit risk¹
Current period
Cumulative
2016
2015
2016
2015
2
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
Private-equity associates, associate
companies and joint arrangements
Listed investments
Unlisted investments
2016
1 186
537
501
7 416
20 778
2015
913
16 956
1 265
10 041
18 007
20 247
18 434
69
942
6 345
3 694
8 133
2 350
19
1 458
82
1 663
5 558
8 993
10 345
1 155
432
1 199
¹ Positive amounts represent gains while negative amounts represent losses. See note C2.1.
73 675
95 043
–
2
–
–
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 FVTPL 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 FVTPL.
A breakdown of the financial assets that are designated as at FVTPL can be found in note I1. A detailed explanation of how
each financial asset is valued can be found in note I2.
122
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I4.2 Financial liabilities designated as at fair value through profit or loss
Rm
2016
Long-term debt instruments
Call and term deposits
Foreign currency liabilities
Negotiable certificates of deposit
2015
Long-term debt instruments
Call and term deposits
Foreign currency liabilities
Provisions and other liabilities
Negotiable certificates of deposit
Contractually
payable at
maturity
Fair value
Change in fair value due to
change in credit risk¹
Current
period
Cumulative
301
33 988
9 333
20 433
64 055
401
31 221
9 527
50
24 245
65 444
283
33 963
9 333
20 415
63 994
409
31 291
9 527
24 369
65 596
(38)
(61)
(35)
(73)
(89)
(150)
(36)
(54)
(54)
(90)
(103)
(157)
¹ Positive amounts represent losses while negative amounts represent gains.
The change in fair value due to credit risk has been determined as the difference between fair values determined using a
credit-adjusted liability curve and a risk-free liability curve.
The curves are constructed using a standard ‘bootstrapping’ process to derive a zero-coupon yield curve. The credit-adjusted
curve was based on offer rates of negotiable certificates of deposit and promissory notes with maturity periods of up to five
years, and thereafter the offer rates of issued Nedbank Ltd bonds are applied.
Nedbank Limited – Annual Report 2016
123
I5 Offsetting financial assets and financial liabilities
ACCOUNTING POLICY
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.
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.
Rm
2016
Financial assets
Derivative financial assets
Loans and advances
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
2015
Financial assets
Derivative financial assets
Loans and advances
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
Effects of netting on the
statement of financial position
Related amounts not set
off in the statement of financial position
Amounts set
off in the
statement of
financial
position in
accordance
with IAS 32
Net amounts
included in
the statement of
financial
position¹
Amounts that
may be
netted off on
the
occurrence of
a future
event
Total
amounts
Net amounts
reflecting
Amounts not
recognised in
the effect of
subject to
the
master
netting
arrangements
IFRS 7
statement of
offsetting
disclosure²
financial
position
Financial
collateral
(5 909)
(28 478)
(34 387)
5 909
28 478
34 387
(12 543)
(37 847)
(50 390)
12 543
37 847
50 390
17 531
3 962
21 493
(13 169)
(65 101)
(78 270)
30 055
2 388
32 443
(32 946)
(59 117)
(92 063)
(12 939)
(12 939)
6 787
6 787
(26 874)
(26 874)
27 909
27 909
4 592
3 962
8 554
(6 382)
(65 101)
(71 483)
3 181
2 388
5 569
(5 037)
(59 117)
(64 154)
513
687 963
688 476
(300)
(685 218)
(685 518)
893
664 419
665 312
(1 050)
(648 919)
(649 969)
18 044
691 925
709 969
(13 469)
(750 319)
(763 788)
30 948
666 807
697 755
(33 996)
(708 036)
(742 032)
–
–
–
–
Gross
amounts
23 440
32 440
55 880
(19 078)
(93 579)
(112 657)
42 598
40 235
82 833
(45 489)
(96 964)
(142 453)
¹
Includes the net amount of financial assets and financial liabilities where offsetting has been applied in terms of IAS 32 and financial instruments that are
subject to master netting agreements but where no offsetting has been applied. Excludes financial instruments that are neither subject to setoff nor
master netting agreements.
²
Includes financial instruments that are neither subject to setoff nor master netting agreements.
124
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I5 Offsetting financial assets and financial liabilities
ACCOUNTING POLICY
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.
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:
bankruptcy; and
simultaneously.
■ these agreements create a right of setoff that is enforceable only following an event of default, insolvency or
■ the group and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities
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.
Effects of netting on the
statement of financial position
Amounts set
off in the
statement of
Net amounts
financial
included in
position in
the statement of
Gross
amounts
accordance
with IAS 32
financial
position¹
23 440
32 440
55 880
(19 078)
(93 579)
(112 657)
42 598
40 235
82 833
(45 489)
(96 964)
(142 453)
(5 909)
(28 478)
(34 387)
5 909
28 478
34 387
(12 543)
(37 847)
(50 390)
12 543
37 847
50 390
17 531
3 962
21 493
(13 169)
(65 101)
(78 270)
30 055
2 388
32 443
(32 946)
(59 117)
(92 063)
Related amounts not set
off in the statement of financial position
Amounts that
may be
netted off on
the
occurrence of
a future
event
Net amounts
reflecting
the effect of
master
netting
arrangements
Amounts not
subject to
IFRS 7
offsetting
disclosure²
Financial
collateral
Total
amounts
recognised in
the
statement of
financial
position
(12 939)
(12 939)
6 787
6 787
(26 874)
(26 874)
27 909
27 909
4 592
3 962
8 554
(6 382)
(65 101)
(71 483)
3 181
2 388
5 569
(5 037)
(59 117)
(64 154)
513
687 963
688 476
(300)
(685 218)
(685 518)
893
664 419
665 312
(1 050)
(648 919)
(649 969)
18 044
691 925
709 969
(13 469)
(750 319)
(763 788)
30 948
666 807
697 755
(33 996)
(708 036)
(742 032)
–
–
–
–
¹
Includes the net amount of financial assets and financial liabilities where offsetting has been applied in terms of IAS 32 and financial instruments that are
subject to master netting agreements but where no offsetting has been applied. Excludes financial instruments that are neither subject to setoff nor
²
Includes financial instruments that are neither subject to setoff nor master netting agreements.
Nedbank Limited – Annual Report 2016
125
Rm
2016
Financial assets
Derivative financial assets
Loans and advances
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
2015
Financial assets
Derivative financial assets
Loans and advances
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
master netting agreements.
I6
Collateral
ACCOUNTING POLICY
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.
I6.1 Collateral pledged
The group has pledged government and other securities (note C3) and negotiable certificates of deposit (note C4)
amounting to R19 162m (2015: R15 614m) 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 R19 127m (2015: R15 531m) are disclosed in note D1.
These transactions are entered into under terms and conditions that are standard industry practice in securities borrowing
and lending activities.
I6.2 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.
The group generally segregates collateral received into the following two classes:
(i)
Financial collateral:
The group takes financial collateral to support credit exposures in the trading book. This includes cash and debt securities
in respect of derivative transactions.
These transactions are entered into under terms and conditions that are standard industry practice in 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.
■ Overdrafts that are either unsecured or secured by guarantees, suretyships or pledged securities.
126
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
(ii) Wholesale portfolio:
■ Commercial properties that 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).
■ Credit exposure to other banks where the risk is commonly mitigated through the use of financial control and netting
agreements.
The valuation and management of collateral across all business units of the group are governed by the Group Credit Policy.
Management considers collateral held in the retail portfolio to be homogenous by nature and therefore more reliably
identifiable. Generally, valuations in respect of mortgage portfolios are updated using statistical index models, published
data by service providers are used for motor vehicles and physical inspection is performed for other types of collateral.
Physical valuations are performed six monthly on the defaulted book. At 31 December 2016 management considered
R141 957m (2015: R142 614m) to be a reasonable estimate of the collateral held in the retail portfolio.
Management considers collateral held in the wholesale portfolio to be non-homogenous and often exhibiting illiquid
characteristics and therefore valuing collateral of this nature requires a significant level of judgement. Collateral of this
nature is valued at the inception of a transaction and at least annually during the life of the transaction usually as part of the
facility review, which includes a review of the security structure and covenants to ensure that proper title is retained over the
relevant collateral. At 31 December 2016 management considered R277 261m (2015: R234 525m) 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 R14 359m (2015: R20 191m), of which Rnil (2015:
Rnil) have been sold or repledged.
I6.3 Collateral taken possession of and recognised in the statement of financial position
Included in properties in possession (note C1.1) is an amount of R120m (2015: R149m), which represents assets the group has
acquired during the year by taking possession of collateral held as security.
Nedbank Limited – Annual Report 2016
127
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
for the year ended 31 December
SECTION J: SHARE-BASED PAYMENTS
Accounting policy
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.
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 and willing market
participants would consider in setting the price of the equity instruments. Vesting conditions, other than market
conditions, are not taken into account in determining fair value. Vesting conditions are taken into account by adjusting
the number of equity instruments included in the measurement of the transaction amount.
Share-based payment transactions with persons or entities other than employees
Transactions in which equity instruments are issued to historically disadvantaged individuals and organisations in SA for
less than fair value are accounted for as share-based payments. Where the group has issued such instruments and
expects to receive services in return for equity instruments, the share-based payments charge is spread over the related
vesting (ie service) period. In instances where such services could not be identified the cost has been expensed with
immediate effect. The valuation techniques are consistent with those mentioned above.
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 facilitate 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
its 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.
128
Nedbank Limited – Annual Report 2016
J1 Description of arrangements
Scheme
Trust/Special-
purpose
vehicle (SPV)
Description
Vesting requirements
TRADITIONAL EMPLOYEE SCHEMES
Nedbank Group
(2005) Share
Option and
Restricted Share
Scheme
Nedbank Group
(2005) Share
Scheme Trust
Nedbank Group
(2005) Matched-
share Scheme
Nedbank Group
(2005) Share
Scheme Trust
Nedbank UK Long-
term Incentive Plan
(LTIP)
n/a
Nedbank UK
Matched Scheme
n/a
Restricted shares are granted
to key personnel to motivate
senior employees to remain
with the group. The granting
of restricted shares is based
on job level, merit and
performance, and is entirely at
the discretion of the trustees
acting on recommendations of
executive management.
Grants are made twice a year
for new appointments and
annually for existing staff, on
a date determined by
the trustees.
All employees of the group are
eligible to participate in the
scheme. An amount of not
more than 50% of their after-
tax bonus can be invested,
which will be matched by the
group with shares.
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 they are
granted at a predetermined
exercise price vesting and
expiry date. When the
participant elects to exercise
SARs, the employer settles the
difference between the
current market price and the
exercise price in cash.
All UK employees of the group
are eligible to participate in
the scheme. An amount of not
more than 50% of their after-
tax bonus can be invested,
which will be matched by the
group with shares.
Maximum
term
3 years
3 years
3 years
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 reached.
Three years’ service and
achievement of Nedbank
Group Ltd performance
target. Where this
performance target is not
met, 50% will vest provided
that three years’ service has
been reached.
Completion of three years’
service, from grant date,
subject to corporate
performance targets
being met.
Completion of three years’
service, from grant date,
subject to corporate
performance targets
being met.
3 years
Nedbank Limited – Annual Report 2016
129
J1 Description of arrangements (continued)
Scheme
Trust/Special-
purpose
vehicle (SPV)
Nedbank Wealth
Management
International LTIP
n/a
n/a
Nedbank Wealth
Management
International
Matched Scheme
Nedbank Africa
n/a
Description
Vesting requirements
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
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.
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 lies 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 lies with the
participants, including the
voting and dividend rights.
Participants must remain in
service for four, five and six
years, after each of which
one-third of the shares
become unrestricted and
one-third of the options vest.
Participants must remain in
service for four, five and six
years, after each of which
one-third of the shares
become unrestricted and
one-third of the options vest.
130
Nedbank Limited – Annual Report 2016
Maximum
term
3 years
3 years
3 years
7 years
7 years
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Scheme
Trust/Special-
purpose
vehicle (SPV)
Description
Vesting requirements
NEDBANK SWAZILAND SINAKEKELWE SCHEMES – BEE AND LTIP
Maximum
term
5 years
No dealing in these shares
during the restricted period of
five years.
Swaziland Broad-
based Employee
Scheme
Swaziland
Management
Scheme
Nedbank
Sinakekelwe
Trust Broad-
based
Employee
Scheme
Nedbank
Sinakekelwe
Trust
Management
Scheme
Swaziland Trust
Long-term
Incentive Scheme
Sinakekelwe
Trust Long-
term Incentive
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.
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 lies 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 lies with the
participants, including
dividend rights. Grants to
staff have yet to be made.
5 years
Participants must remain in
service for three, four and five
years, after each of which
one-third of the shares
become unrestricted and
one-third of the options vest.
5 years
Participants must remain in
service for three, four and five
years, after each of which
one-third of the shares
become unrestricted and
one-third of the options vest.
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.
Nedbank Limited – Annual Report 2016
131
Share-based
payments expense
Share-based payments
reserve/liability
2016
Rm
2015
Rm
2016
Rm
2015
Rm
J2 Effect on profit and financial position
Traditional employee schemes
548
413
1 135
1 090
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.
434
109
(2)
1
1
1
4
12
10
2
379
102
(59)
2
(14)
2
1
16
12
4
879
223
15
2
8
3
5
42
33
9
880
181
14
3
8
3
1
65
44
21
560
429
1 177
1 155
2016
2015
Weighted-
average
exercise price
R
Number of
instruments
Number of
instruments
Weighted-
average
exercise price
R
J3 Movements in number of instruments
Nedbank Group (2005) Share Option Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
Nedbank Group (2005) Matched-share Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
Nedbank UK Long-term Incentive Plan
Outstanding at the beginning of the year
Granted
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)
9 234 425
3 990 166
(471 075)
(3 123 220)
9 630 296
–
1 917 120
991 867
(202 744)
(493 000)
2 213 243
–
119 502
22 566
(1 172)
(38 360)
102 536
–
9 868 377
3 087 302
(438 408)
(3 282 846)
9 234 425
–
1 649 973
773 259
(108 820)
(397 292)
1 917 120
–
197 288
28 806
(44 046)
(62 546)
119 502
–
–
190,74
–
189,10
–
–
–
251,42
–
240,75
–
–
132
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
2016
2015
Weighted-
average
exercise price
R
Number of
instruments
Number of
instruments
Weighted-
average
exercise price
R
Nedbank UK Matched-share Scheme
Outstanding at the beginning of the year
Granted
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 Wealth Management International Long-term
Incentive Plan
Outstanding at the beginning of the year
Granted
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 Wealth Management International Matched-share
Scheme
Outstanding at the beginning of the year
Granted
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 Africa
Outstanding at the beginning of the year
Granted
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
Black Executive Scheme
16 811
4 198
(6 760)
14 249
–
61 284
33 130
11
(21 508)
72 917
–
18 397
4 180
(6 662)
15 915
–
30 096
31 090
(4 916)
56 270
–
17 427
7 240
(7 856)
16 811
–
73 223
20 513
(2 750)
(29 702)
61 284
–
20 207
4 122
(5 932)
18 397
–
30 096
30 096
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Outstanding at the beginning of the year
820 207
241,38
1 014 319
223,06
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)
–
(301 751)
518 456
26 001
706 559
(48 357)
(377 842)
6 355
(8 909)
277 806
96 001
(25 795)
(168 317)
820 207
20 205
162,29
194,31
121,08
241,38
248,07
1 545 884
227,59
126,03
77,69
132,49
197,05
(100 113)
(731 182)
13 281
(21 311)
706 559
164 204
101,41
248,07
Nedbank Limited – Annual Report 2016
133
J4
Instruments outstanding at the end of the
year by exercise price
Nedbank Group (2005) Share Option and Restricted-share
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
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
121,08
128,44
132,18
139,69
161,88
Nedbank Africa
0,00
2016
2015
Weighted-
average
remaining
contractual
life (years)
Number of
instruments
Weighted-
average
remaining
contractual
life (years)
Number of
instruments
9 630 296
9 630 296
2 213 243
2 213 243
102 536
102 536
14 249
14 249
72 917
72 917
15 915
15 915
160 652
1 942
28 622
20 400
136 710
80 649
89 481
518 456
15 684
16 953
103 946
32 923
59 263
49 037
277 806
56 270
56 270
1,3
1,3
1,4
1,4
0,9
0,9
1,3
1,3
1,4
1,4
1,0
1,0
1,3
0,2
1,2
0,6
2,2
2,6
3,2
2,0
0,6
0,2
1,1
0,6
0,2
2,2
1,0
1,7
1,7
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
1,2
1,2
1,4
1,4
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
134
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
J5
Instruments granted during the year
The weighted-average fair value of instruments granted during the year has been calculated using the Black-Scholes option
pricing model, using the following inputs and assumptions:
Nedbank
Group
(2005)
Share
Option
and
Restricted-
share
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
3 983 062
989 936
22 566
4 198
33 130
4 180
31 090
183,73
161,97
183,18
161,97
183,18
183,73
194,33
183,19
194,25
183,19
194,25
183,19
25,7
25,7
3,0
3,0
8,2
8,2
1 353
1 648
3,0
3,0
25,71
25,7
25,7
3,0
3,0
3,0
6
3,0
4
3,0
11
3,0
13
3,0
8,2
39
3,0
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
23,0
23,0
3,0
3,0
7,0
7,0
1 350
1 635
3,0
3,0
23,0
23,0
23,0
3,0
3,0
3,0
7,0
11
3,0
7,0
19
3,0
7,0
41
3,0
14
3,0
6
3,0
2016
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
risk-free interest rate
(%)
Number of
participants
Weighted-average
vesting period (years)
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
risk-free interest rate
(%)
Number of
participants
Weighted-average
vesting period (years)
¹ Fair value per instrument has been recalculated in line with a change in the valuation methodology for shares linked to the Financial Index.
²
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 2016
135
SECTION K: OTHER LIABILITIES
Provisions and other liabilities
K1
Accounting policy
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.
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.
K1.1 Movement in carrying amount
Creditors and other accounts
Deferred revenue: client loyalty programmes
Short-trading securities and spot positions
Leave pay accrual (note K1.2)
K1.2 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
K1.3 Day-one gains and losses
2016
Rm
2015
Rm
9 504
224
2 235
754
12 717
675
1 966
6 236
256
2 744
675
9 911
711
1 391
(1 887)
(1 427)
754
675
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.
136
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
K2 Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2016
Rm
2015
Rm
22 177
3 360
26 374
4 419
101 566
101 747
127 103
132 540
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 K1). 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 outcomes of which
cannot be foreseen at present.
The largest potential claim relates to Pinnacle Point Group Ltd, where Absa Bank Ltd (‘Absa’) has initiated an action in the
High Court against Nedbank for the sum of R773m, where Absa alleges that Nedbank had a legal duty of care to it in relation
to certain single-stock futures transactions.
In a matter relating to the same events, New Port Finance Company (Pty) Ltd and the Winifred Trust have sued Absa for
R405m and R65m respectively, alleging that Absa had a duty of care towards them. During November 2016 Absa joined
Nedbank as a third party to that action claiming that, should Absa be held liable, then Absa would be entitled to claim a
contribution from Nedbank.
Nedbank’s counsel is of the view that Nedbank has a strong case to successfully resist both matters.
K3 Commitments
K3.1 Capital expenditure approved by directors
Contracted
Not yet contracted
2016
Rm
2015
Rm
515
2 092
2 607
1 314
2 222
3 536
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.
K3.2 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:
2016
Land and buildings¹
Furniture and equipment
2015
Land and buildings¹
Furniture and equipment
2017
Rm
2018–2022
Rm
Beyond 2022
Rm
913
177
1 090
1 924
66
1 990
578
59
637
2016
Rm
2017–2021
Rm
Beyond 2021
Rm
760
181
941
1 892
767
1 892
767
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.
Nedbank Limited – Annual Report 2016
137
K3 Commitments (continued)
K3.2 Operating lease commitments (continued)
The terms of renewal and escalation clauses are as follows:
The majority of material leases entered into by the group include an option to renew the lease. If the rental for the renewal
period has not been agreed on or determined by the commencement date of the renewal period, the tenant must continue to
pay the existing monthly rental. Once the rental is determined, cumulative adjustments will be made to the amount payable
for the following month. Escalation clauses for major leases entered into by the group range between 6% and 8% per annum.
For all major lease agreements entered into there is no requirement to pay contingent rent or purchase options.
K3.3 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 C7).
SECTION L: RISK AND BALANCE SHEET MANAGEMENT
Key assumptions concerning the future and key sources of estimation
Financial risk management
The group’s risk management policies and procedures are disclosed in the Pillar 3: Basel III Public Disclosure Report,
available at nedbank.co.za. 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.
L1 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 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 ALCO and the Executive
Risk Committee, 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 D2.
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.
138
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
L2
Liquidity gap
Rm
2016
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
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Non-
deter-
mined
Total
37 875
21 164
3 454
201
16 723
1 906
304
20 419
1 930
9 912
4 090
6 664
2 327
940
2 558
18 889
25 973
149 176
31 975
52 826
271 353
186 595
38 380
68 218
18 044
50 687
691 925
32 807
32 807
213 996
51 745
78 037
304 244
219 232
32 807
900 061
67 722
16 489
67 722
13 469
750 319
16 489
52 062
34 341
60 078
30 948
42 733
666 807
25 826
25 826
59 954
13 770
59 954
33 996
708 036
13 770
44 977
Derivative financial instruments
2 229
Amounts owed to depositors
542 572
1 329
71 633
1 362
65 354
3 677
61 857
4 872
8 903
Provisions and other liabilities
Long-term debt instruments
2 724
836
2 609
26 837
19 056
Net liquidity gap
(333 529)
(22 053)
8 712
211 873
186 401
(51 404)
–
547 525
73 798
69 325
92 371
32 831
84 211
900 061
2015
Cash and cash equivalents
(including mandatory reserve
deposits with central banks)
Other short-term securities
Derivative financial instruments
Government and other
securities
32 529
22 047
8 795
1 812
12 712
3 336
18 055
2 415
7 264
7 379
9 023
1 091
1 688
7 481
17 172
15 301
Loans and advances
155 029
27 290
48 309
259 479
176 700
Other assets
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
219 491
46 838
76 260
291 294
201 024
25 826
860 733
7 998
511 986
2 882
56 433
2 582
7 593
58 386
70 542
12 941
10 689
Long-term debt instruments
5 252
3 923
19 805
15 997
Net liquidity gap
(305 745)
(12 477)
11 369
193 354
161 397
(47 898)
–
525 236
59 315
64 891
97 940
39 627
73 724
860 733
This note has been prepared on a contractual maturity basis.
The group has high-quality liquid assets and other sources of quick liquidity. Other sources of quick liquid assets include
corporate bonds and listed equities, unencumbered trading securities, price-sensitive overnight loans, other banks’ paper and
unutilised bank credit lines.
Nedbank Limited – Annual Report 2016
139
L3
Interest rate repricing gap
Rm
2016
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Trading and
non-rate
Total
Total assets
Total equity and liabilities
600 299
539 110
25 712
43 391
Interest rate hedging activities
(11 444)
25 364
22 075
41 241
15 942
(3 224)
47 375
27 158
24 907
179 693
900 061
14 580
234 581
900 061
(20 183)
(9 679)
34
648
(54 888)
–
–
49 745
49 745
7 685
57 430
54 206
54 240
54 888
5,5
6,4
6,0
6,0
6,1
553 361
518 086
13 375
48 650
48 650
31 050
25 943
7 120
12 227
21 915
43 452
32 805
20 080
10 936
(24 385)
22 773
12 555
(7 046)
188 182
860 733
251 264
860 733
46
(1 013)
3 172
(63 082)
–
–
60 877
60 923
59 910
63 082
5,7
7,1
7,1
7,0
7,3
Repricing profile
Cumulative repricing profile
Expressed as a percentage of
total assets
2015
Total assets
Total equity and liabilities
Interest rate hedging activities
Repricing profile
Cumulative repricing profile
Expressed as a percentage of
total assets
L4 Historical value at risk (99%, one-day) by risk type
2016
2015
Rm
Average
Minimum
Maximum
Year-end
Average
Minimum
Maximum
Year-end
Foreign exchange
Interest rate
Credit
Commodity
Diversification
Total VAR exposure
9,3
16,0
7,3
0,3
(8,1)
24,8
1,0
7,7
4,9
< 0,1
25,4
33,5
10,9
2,7
8,2
52,0
2,8
11,6
8,4
< 0.1
(6,4)
16,4
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
140
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
SECTION M: CASHFLOW INFORMATION
M1 Reconciliation of profit from operations to cash generated by
operations
Profit from operations
Adjusted for:
– Depreciation (note B7)
– Amortisation: computer software and intangible assets (note B7)
– Movement in impairment of loans and advances
– Net income on investment banking assets
– Non-trading and capital items (note B9)
– Indirect taxation (note B8.1)
Disposal of non-current assets held for sale
M2 Cash received from clients
Interest and similar income (note B5.1)
Commission and fees (note B6)
Net trading income (note B6)
Other income
M3 Cash paid to clients, employees and suppliers
Interest expense and similar charges (note B5.2)
Staff costs (note B7)
Other operating expenses
M4 Increase in operating assets
Other short-term securities
Government and other securities
Loans and advances and other operating assets
M5 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
M6 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 B8.1)
Taxation paid
2016
Rm
2015
Rm
13 243
11 039
1 181
784
5 411
(11)
289
810
969
705
5 742
(10)
144
668
21 707
19 257
69 862
14 587
3 321
1 433
55 128
13 404
2 783
1 287
89 203
72 602
(45 344)
(13 819)
(9 499)
(32 724)
(12 893)
(8 892)
(68 662)
(54 509)
(8 140)
(7 954)
(21 963)
(3 756)
(15 905)
(83 282)
(38 057)
(102 943)
4 115
25 686
8 886
3 596
(18 411)
23 872
5 290
54 430
10 745
2 948
20 022
93 435
817
201
(3 570)
(2 828)
(70)
(387)
(3 210)
(810)
(4 020)
341
(817)
(3 103)
(668)
(3 771)
Nedbank Limited – Annual Report 2016
141
SECTION N: ADDITIONAL INFORMATION
N1 Foreign currency conversion
Accounting policy
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 retranslated subsequently.
Exchange differences on non-monetary items are recognised consistently with the gains and losses that arise on such
items, ie 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.
Monetary figures in these financial statements are expressed in SA rand to the nearest million. The approximate value of the
SA rand as at 31 December 2016 against the following currencies was:
United States dollar
Pound sterling
Euro
Geographic analyses
2016
Actual
0,07264
0,05899
0,06860
2015
Actual
0,06401
0,04318
0,05861
2016
Average
0,06863
0,05088
0,06215
2015
Average
0,07727
0,05067
0,06997
The geographic analyses within various notes are based on the geographic location of the clients or transactions and not the
domicile of the group entity.
N2 Events after the reporting period
There are no material events after the reporting period to report on.
142
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors' emoluments
The following disclosures are those required by the Companies Act, 71 of 2008, in respect of remuneration of directors and
prescribed officers:
N3.1 Total remuneration of executive directors and prescribed officers
Mike Brown
Mfundo Nkuhlu
Raisibe Morathi
Brian Kennedy
R000
2016
2015
Cash portion of package
Other benefits
Defined-contribution Retirement
Fund
Guaranteed remuneration
Cash performance incentive
Cash performance incentive
(delivered in shares)
6 680
148
953
7 781
7 750
6 374
141
910
7 425
8 250
6 750
7 250
Total short-term incentive (STI)1
14 500
15 500
2016
4 415
137
635
5 187
4 625
3 625
8 250
2015
2016
2015
2016
2015
4 258
130
613
5 000
4 750
3 750
8 500
3 654
105
666
4 425
4 625
3 405
100
621
4 125
4 500
3 819
233
305
4 357
9 320
3 620
239
291
4 150
8 625
3 625
3 500
8 320
7 625
8 250
12 675
8 000
17 640
16 250
12 125
21 997
20 400
Total remuneration2
22 281
22 925
13 437
13 500
Value of share-based awards (face
value at award)3
14 500
13 500
9 250
8 750
8 000
7 500
8 500
7 500
Total direct remuneration
36 781
36 425
22 687
22 250
20 675
19 625
30 497
27 900
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)3
Total direct remuneration
Iolanda Ruggiero4
Ciko Thomas5, 6, 7, 8
Philip Wessels6, 8
2016
3 011
84
432
3 527
3 550
2 550
6 100
9 627
2015
1 934
54
262
2 250
3 500
2 500
6 000
2016
2 513
78
410
3 001
4 250
3 250
7 500
2015
2016
1 036
29
98
–
1 163
–
–
2015
4 146
113
391
4 650
4 875
3 875
8 750
8 250
10 501
1 163
13 400
6 500
6 000
12 000
8 000
16 127
14 250
22 501
–
1 163
21 400
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 27,5% (before share price movement), subject to fulfilment of the
corporate performance targets (CPTs), and the amount remaining being invested in the scheme for 36 months.
Total remuneration is the sum of guaranteed remuneration and total STI.
This is the value of the share-based awards made in the following financial year.
Iolanda Ruggiero became a prescribed officer on 1 May 2015.
Comparative values are not given for items that reflect part-year service in the role.
Ciko Thomas was appointed as a prescribed officer on 1 April 2016.
Awards include on-appointment awards made in respect of appointment to more senior roles.
Philip Wessels retired from the bank on 30 March 2016. Amounts therefore reflect part-year service.
Nedbank Limited – Annual Report 2016
143
N3 Directors' emoluments (continued)
N3.2 Non-executive directors’ remuneration
David Adomakoh
Tom Boardman
Brian Dames
Mustaq Enus-Brey
Ian Gladman
Errol Kruger
Paul Hanratty
Bruce Hemphill
Reuel Khoza
Mpho Makwana
Mantsika Matooane
Nomavuso Mnxasana
Vassi Naidoo
Joel Netshitenzhe
Rob Leith
Julian Roberts
Gloria Serobe
Stanley Subramoney
Malcolm Wyman
Total
Nedbank and
Nedbank
Group
Board fees
R000
Committee
fees
R000
428
1 194
428
428
188
81
428
428
428
428
4 875
428
98
428
599
10 887
144
1 238
290
363
158
56
207
853
289
832
277
83
533
1 112
6 435
Note
1,6
2,6
7
3
4,7
7
6
6
5,7
7
6
Total
2016
R000
572
2432
718
791
346
137
635
1 281
717
1 260
4 875
705
181
961
1 711
17 322
Total
2015
R000
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
1
David Adomakoh resigned as member of the Group Credit Committee and Large-exposure Approval Committee effective 1 August 2016. He was
appointed as a member of the GTSEC on 28 October 2016.
2 Tom Boardman sits on the Board of Nedbank Private Wealth (Isle of Man). His board fees are inclusive of the Nedbank Private Wealth (Isle of Man) fees
of £39 000.
3 Errol Kruger was appointed as a director of Nedbank Ltd and Nedbank Group Ltd with effect from 1 August 2016 and as a member of the Group Credit
Committee, Large-exposure Approval Committee and Capital Management Committee.
4 Paul Hanratty resigned as a director of Nedbank Ltd and Nedbank Group Ltd and all committes on 12 March 2016.
5 Rob Leith was appointed as a director of Nedbank Ltd and Nedbank Group Ltd as a member of the Group Credit Committee and Group Risk and Capital
Management Committee on 13 October 2016.
6 Joel Netshitenzhe, Tom Boardman, Mpho Makwana, David Adomakoh and Malcolm Wyman were appointed members of the Group Related-party
Transactions Committee on 11 May 2015.
7 Fees for Ian Gladman, Paul Hanratty, Bruce Hemphill, Rob Leith and Julian Roberts were paid to Old Mutual plc.
144
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors' emoluments (continued)
N3.3 Directors’ interests
At 31 December 2016, the directors’ interests in ordinary shares in Nedbank Group Ltd and preference shares in Nedbank Ltd
were as follows:
Number of shares
David Adomakoh
Tom Boardman
Mike Brown
Brian Dames
Ian Gladman
Paul Hanratty1
Bruce Hemphill
Errol Kruger2
Rob Leith2
Mpho Makwana
Mantsika Matooane
Mantsika Matooane (Nedbank Ltd preference shares)
Nomavuso Mnxasana
Raisibe Morathi
Vassi Naidoo
Joel Netshitenzhe
Mfundo Nkuhlu
Stanley Subramoney
Malcolm Wyman
Total ordinary shares
Total preference shares
1 Resigned/Retired during 2016.
2 Appointed during 2016.
Beneficial direct
Beneficial indirect
2016
2015
2016
2015
4 012
216 087
4 012
140 421
10 988
286 375
10 988
268 517
44
2 261
11 000
2 261
11 000
119 876
72 641
8 178
7 420
118 197
45 785
165 527
2 300
7 420
156 916
43 575
149 962
2 300
350 458
11 000
219 335
11 000
636 592
632 258
No change in the above interests occurred between 31 December 2016 and 1 March 2017.
Nedbank Limited – Annual Report 2016
145
N3 Directors' emoluments (continued)
N3.4 Share-based payments to executive directors and prescribed officers
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
Number of
restricted
shares/
options
released
options
lapsed
shares/
Market price
Value
gained
at vesting
on vesting
lapsing
plans (7)
(R)
(R)
loss
on
(R)
respect of
Number of
all
restricted
shares/
options
(R)
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value of
Notional
value of
dividends
paid in
28 962 07/03/2013
189,90 08/03/2016
28 962 08/03/2013
189,90 09/03/2016
62 200 06/03/2014
209,00 07/03/2017
50 826
12/03/2015
255,77
13/03/2018
70 851
17/03/2016
190,54
17/03/2019
11 440
28 962
17 522
181,00
2 070 640
(3 171 482)
–
181,00
5 242 122
16 099
31/03/2013
195,66 01/04/2016
01/04/2016
191,00 01/04/2016
32 198
–
191,00
6 149 818
16 141
31/03/2014
223,03 01/04/2017
16 435
31/03/2015
251,29 01/04/2018
22 563
31/03/2016
189,58 01/04/2019
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
–
191,00
585 606
Own shares
31/03/2014
223,03 01/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
19 747 07/03/2013
189,90 08/03/2016
19 747 08/03/2013
189,90 09/03/2016
20 334 06/03/2014
209,00 07/03/2017
20 334 07/03/2014
209,00 08/03/2017
45 939
12/03/2015
255,77
13/03/2018
45 922 17/03/2016
190,54 17/03/2019
14 048 186
(3 171 482)
2 862 859
2 862 859
7 801
19 747
11 946
181,00
1 411 981
(2 162 226)
–
181,00
3 574 207
2 556
31/03/2013
195,66 01/04/2016
2 556 01/04/2016
191,00 01/04/2016
5 112
191,00
976 392
8 743
31/03/2014
223,03 01/04/2017
8 511
31/03/2015
251,29 01/04/2018
11 670
31/03/2016
189,58 01/04/2019
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
6 548 186
(2 162 226)
2 090 646
2 090 646
–
–
–
–
62 200
31/12/2016 07/03/2017
50 826
31/12/2017
13/03/2018
70 851
31/12/2018
17/03/2019
16 141
31/12/2016 01/04/2017
16 435
31/12/2017 01/04/2018
22 563
31/12/2018 01/04/2019
20 334
31/12/2016 07/03/2017
20 334
31/12/2016 08/03/2017
45 939
31/12/2017
13/03/2018
45 922
31/12/2018
17/03/2019
8 743
31/12/2016 01/04/2017
8 511
31/12/2017 01/04/2018
11 670
31/12/2018 01/04/2019
Executive
directors
MWT Brown
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
MC Nkuhlu
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
146
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Executive
directors
MWT Brown
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Total value of
dividends
Total
MC Nkuhlu
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
N3 Directors' emoluments (continued)
N3.4 Share-based payments to executive directors and prescribed officers
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
shares/
options
released
Number of
restricted
shares/
options
lapsed
Market price
at vesting
(R)
Value
gained
on vesting
(R)
Notional
value of
loss
on
lapsing
(R)
Total value of
dividends
paid in
respect of
all
plans (7)
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
16 099
31/03/2013
195,66 01/04/2016
01/04/2016
191,00 01/04/2016
32 198
–
191,00
6 149 818
Share Scheme
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
–
191,00
585 606
62 200
31/12/2016 07/03/2017
50 826
31/12/2017
13/03/2018
70 851
31/12/2018
17/03/2019
16 141
31/12/2016 01/04/2017
16 435
31/12/2017 01/04/2018
22 563
31/12/2018 01/04/2019
–
–
11 440
28 962
17 522
181,00
2 070 640
(3 171 482)
–
181,00
5 242 122
28 962 07/03/2013
189,90 08/03/2016
28 962 08/03/2013
189,90 09/03/2016
62 200 06/03/2014
209,00 07/03/2017
50 826
12/03/2015
255,77
13/03/2018
16 141
31/03/2014
223,03 01/04/2017
16 435
31/03/2015
251,29 01/04/2018
70 851
17/03/2016
190,54
17/03/2019
22 563
31/03/2016
189,58 01/04/2019
Own shares
31/03/2014
223,03 01/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
19 747 07/03/2013
189,90 08/03/2016
19 747 08/03/2013
189,90 09/03/2016
20 334 06/03/2014
209,00 07/03/2017
20 334 07/03/2014
209,00 08/03/2017
45 939
12/03/2015
255,77
13/03/2018
45 922 17/03/2016
190,54 17/03/2019
7 801
19 747
2 556
31/03/2013
195,66 01/04/2016
2 556 01/04/2016
191,00 01/04/2016
5 112
191,00
976 392
8 743
31/03/2014
223,03 01/04/2017
8 511
31/03/2015
251,29 01/04/2018
11 670
31/03/2016
189,58 01/04/2019
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
14 048 186
(3 171 482)
2 862 859
2 862 859
11 946
181,00
1 411 981
(2 162 226)
–
181,00
3 574 207
–
–
20 334
31/12/2016 07/03/2017
20 334
31/12/2016 08/03/2017
45 939
31/12/2017
13/03/2018
45 922
31/12/2018
17/03/2019
8 743
31/12/2016 01/04/2017
8 511
31/12/2017 01/04/2018
11 670
31/12/2018 01/04/2019
6 548 186
(2 162 226)
2 090 646
2 090 646
Nedbank Limited – Annual Report 2016
147
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
Number of
restricted
shares/
options
released
options
lapsed
shares/
Market price
Value
gained
at vesting
on vesting
lapsing
plans (7)
(R)
(R)
loss
on
(R)
respect of
Number of
all
restricted
shares/
options
(R)
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value of
Notional
value of
dividends
paid in
15 797 07/03/2013
15 797 08/03/2013
33 492 06/03/2014
12/03/2015
27 368
189,90 08/03/2016
189,90 09/03/2016
209,00 07/03/2017
13/03/2018
255,77
7 666
7 936
7 924
31/03/2013
31/03/2014
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
Own shares
31/03/2013
Own shares 01/04/2014
31/03/2015
Own shares
195,66 01/04/2016
223,03 02/04/2017
251,29 01/04/2018
6 240
15 797
9 557
181,00
181,00
1 129 440
2 859 257
(1 729 817)
39 361
17/03/2016
190,54
17/03/2019
7 666 01/04/2016
191,00 01/04/2016
15 332
191,00
2 928 412
–
10 892
31/03/2016
189,58 01/04/2019
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares
31/03/2016
189,58 01/04/2019
6 800 03/03/2010
– 04/03/2016
6 800
181,00
1 230 800
20 400 03/03/2010
121,08 04/03/2016
20 400
178,02
1 161 576
9 895 091
(1 729 817)
1 763 175
1 763 175
5 720
14 481
8 761
1 035 320
(1 585 741)
181,00
181,00
2 621 061
14 481 07/03/2013
14 481 08/03/2013
16 746 06/03/2014
16 746 07/03/2014
12/11/2014
10 898
13/11/2014
10 898
12/03/2015
12 902
13/03/2015
8 601
189,90 08/03/2016
189,90 09/03/2016
209,00 07/03/2017
209,00 07/03/2017
12/11/2017
229,39
13/11/2017
229,39
13/03/2018
255,77
14/03/2018
255,77
7 666
7 936
8 217
31/03/2013
31/03/2014
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
31/03/2013
Own shares
Own shares 01/04/2014
31/03/2015
Own shares
195,66 01/04/2016
223,03 02/04/2017
251,29 01/04/2018
25 191
16 794
17/03/2016
18/03/2016
190,54
190,54
17/03/2019
18/03/2019
7 666 01/04/2016
191,00 01/04/2016
15 332
191,00
2 928 412
–
12 059
31/03/2016
189,58 01/04/2019
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares
31/03/2016
189,58 01/04/2019
7 170 399
(1 585 741)
1 826 975
1 826 975
33 492
27 368
31/12/2016 08/03/2016
31/12/2017 09/03/2016
39 361
31/12/2018
17/03/2019
7 936
7 924
31/12/2016 01/04/2017
31/12/2017 01/04/2017
10 892
31/12/2018 01/04/2018
16 746
16 746
10 898
10 898
31/12/2016 07/03/2017
31/12/2016 07/03/2017
31/12/2016
12/11/2017
31/12/2016
13/11/2017
12 902
31/12/2017
13/03/2018
8 601
31/12/2017
14/03/2018
25 191
31/12/2018
17/03/2019
16 794
31/12/2018
18/03/2019
7 936
8 217
31/12/2016 01/04/2017
31/12/2017 01/04/2018
12 059
31/12/2018 01/04/2019
Executive
directors
RK Morathi
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Eyethu restricted
shares
Eyethu restricted
options
Total value of
dividends
Total
Prescribed officers
P Wessels
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
148
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
shares/
options
released
Number of
restricted
shares/
options
lapsed
Market price
at vesting
(R)
Value
gained
on vesting
(R)
Notional
value of
loss
on
lapsing
(R)
Total value of
dividends
paid in
respect of
all
plans (7)
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
15 797 07/03/2013
189,90 08/03/2016
15 797 08/03/2013
189,90 09/03/2016
33 492 06/03/2014
209,00 07/03/2017
27 368
12/03/2015
255,77
13/03/2018
7 666
31/03/2013
7 936
7 924
31/03/2014
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
39 361
17/03/2016
190,54
17/03/2019
10 892
31/03/2016
189,58 01/04/2019
6 240
15 797
9 557
181,00
181,00
1 129 440
2 859 257
(1 729 817)
7 666 01/04/2016
191,00 01/04/2016
15 332
191,00
2 928 412
–
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
6 800 03/03/2010
– 04/03/2016
6 800
181,00
1 230 800
20 400 03/03/2010
121,08 04/03/2016
20 400
178,02
1 161 576
9 895 091
(1 729 817)
1 763 175
1 763 175
5 720
14 481
8 761
181,00
181,00
1 035 320
2 621 061
(1 585 741)
25 191
17/03/2016
190,54
17/03/2019
16 794
18/03/2016
190,54
18/03/2019
12 059
31/03/2016
189,58 01/04/2019
7 666 01/04/2016
191,00 01/04/2016
15 332
191,00
2 928 412
–
Share Scheme
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
14 481 07/03/2013
189,90 08/03/2016
14 481 08/03/2013
189,90 09/03/2016
16 746 06/03/2014
209,00 07/03/2017
16 746 07/03/2014
209,00 07/03/2017
10 898
10 898
12/11/2014
13/11/2014
229,39
229,39
12/11/2017
13/11/2017
12 902
12/03/2015
255,77
13/03/2018
8 601
13/03/2015
255,77
14/03/2018
7 666
7 936
31/03/2013
31/03/2014
8 217
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
33 492
27 368
39 361
31/12/2016 08/03/2016
31/12/2017 09/03/2016
17/03/2019
31/12/2018
7 936
7 924
10 892
31/12/2016 01/04/2017
31/12/2017 01/04/2017
31/12/2018 01/04/2018
16 746
16 746
10 898
10 898
12 902
8 601
25 191
16 794
31/12/2016 07/03/2017
31/12/2016 07/03/2017
12/11/2017
31/12/2016
13/11/2017
31/12/2016
13/03/2018
31/12/2017
14/03/2018
31/12/2017
17/03/2019
31/12/2018
18/03/2019
31/12/2018
7 936
8 217
12 059
31/12/2016 01/04/2017
31/12/2017 01/04/2018
31/12/2018 01/04/2019
7 170 399
(1 585 741)
1 826 975
1 826 975
Nedbank Limited – Annual Report 2016
149
Executive
directors
RK Morathi
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Eyethu restricted
shares
Eyethu restricted
options
Total value of
dividends
Total
Prescribed officers
P Wessels
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Total value of
dividends
Total
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
Number of
restricted
shares/
options
released
options
lapsed
shares/
Market price
Value
gained
at vesting
on vesting
lapsing
plans (7)
(R)
(R)
loss
on
(R)
respect of
Number of
all
restricted
shares/
options
(R)
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value of
Notional
value of
dividends
paid in
15 797 07/03/2013
15 797 08/03/2013
16 746 06/03/2014
16 746 07/03/2014
12/03/2015
22 285
13/03/2015
14 857
189,90 08/03/2016
189,90 09/03/2016
209,00 07/03/2017
209,00 08/03/2017
13/03/2018
255,77
14/03/2018
255,77
15 026
16 141
17 609
31/03/2013
31/03/2014
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
Own shares
31/03/2013
Own shares 01/04/2014
31/03/2015
Own shares
195,66 01/04/2016
223,03 02/04/2017
251,29 01/04/2018
9 873 07/03/2013
9 873 08/03/2013
10 287 06/03/2014
10 287 07/03/2014
12/03/2015
10 204
13/03/2015
6 803
189,90 08/03/2016
189,90 09/03/2016
209,00 07/03/2017
209,00 08/03/2017
13/03/2018
255,77
14/03/2018
255,77
6 240
15 797
9 557
1 129 440
(1 729 817)
181,00
181,00
2 859 257
23 617
15 744
17/03/2016
18/03/2016
190,54
190,54
17/03/2019
18/03/2019
15 026 01/04/2016
191,00 01/04/2016
30 412
191,00
5 808 692
–
23 730
31/03/2016
189,58 01/04/2019
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares
31/03/2016
189,58 01/04/2019
10 382 995
(1 729 817)
1 955 659
1 955 659
3 900
9 873
5 973
181,00
181,00
705 900
1 787 013
(1 081 113)
14 957
9 971
14 169
9 447
17/03/2016
18/03/2016
11/08/2016
12/08/2016
190,54
190,54
211,87
211,87
17/03/2019
18/03/2019
11/08/2019
12/08/2019
1 345
2 973
31/03/2014
31/03/2015
223,03 01/04/2017
251,29 01/04/2018
6 846
31/03/2016
189,58 04/10/2019
222,35
222,35
222,35
299 061
330 634
507 403
Own shares
31/03/2016
189,58 01/04/2019
222,35
345 977
3 975 988
(1 081 113)
1 100 619
1 100 619
1 345
1 487
2 282
1 556
16 746
31/12/2016 07/03/2017
16 746
31/12/2016 08/03/2017
22 285
31/12/2017
13/03/2018
14 857
31/12/2017
14/03/2018
23 617
31/12/2018
17/03/2019
15 744
31/12/2018
18/03/2019
16 141
31/12/2015 01/04/2017
17 609
31/12/2016 01/04/2018
23 730
31/12/2017 01/04/2019
10 287
10 287
31/12/2016 07/03/2017
31/12/2016 08/03/2017
10 204
31/12/2017
13/03/2018
6 803
31/12/2017
14/03/2018
14 957
31/12/2018
17/03/2019
9 971
31/12/2018
18/03/2019
14 169
31/12/2018
11/08/2019
9 447
31/12/2018
12/08/2019
1 486
4 564
31/12/2016 01/04/2018
31/12/2017 01/04/2019
Executive
directors
B Kennedy
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
C Thomas
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
150
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
shares/
options
released
Number of
restricted
shares/
options
lapsed
Market price
at vesting
(R)
Value
gained
on vesting
(R)
Notional
value of
loss
on
lapsing
(R)
Total value of
dividends
paid in
respect of
all
plans (7)
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
6 240
15 797
9 557
181,00
181,00
1 129 440
2 859 257
(1 729 817)
15 026
31/03/2013
195,66 01/04/2016
15 026 01/04/2016
191,00 01/04/2016
30 412
191,00
5 808 692
–
Share Scheme
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
10 382 995
(1 729 817)
1 955 659
1 955 659
3 900
9 873
5 973
181,00
181,00
705 900
1 787 013
(1 081 113)
1 345
1 487
2 282
1 556
222,35
222,35
222,35
299 061
330 634
507 403
222,35
345 977
3 975 988
(1 081 113)
1 100 619
1 100 619
16 746
16 746
22 285
14 857
23 617
15 744
31/12/2016 07/03/2017
31/12/2016 08/03/2017
13/03/2018
31/12/2017
14/03/2018
31/12/2017
17/03/2019
31/12/2018
18/03/2019
31/12/2018
16 141
17 609
23 730
31/12/2015 01/04/2017
31/12/2016 01/04/2018
31/12/2017 01/04/2019
10 287
10 287
10 204
6 803
14 957
9 971
14 169
9 447
31/12/2016 07/03/2017
31/12/2016 08/03/2017
13/03/2018
31/12/2017
14/03/2018
31/12/2017
17/03/2019
31/12/2018
18/03/2019
31/12/2018
11/08/2019
31/12/2018
12/08/2019
31/12/2018
1 486
4 564
31/12/2016 01/04/2018
31/12/2017 01/04/2019
Executive
directors
B Kennedy
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Total value of
dividends
Total
C Thomas
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
15 797 07/03/2013
189,90 08/03/2016
15 797 08/03/2013
189,90 09/03/2016
16 746 06/03/2014
209,00 07/03/2017
16 746 07/03/2014
209,00 08/03/2017
22 285
12/03/2015
255,77
13/03/2018
14 857
13/03/2015
255,77
14/03/2018
23 617
17/03/2016
190,54
17/03/2019
15 744
18/03/2016
190,54
18/03/2019
16 141
31/03/2014
223,03 01/04/2017
17 609
31/03/2015
251,29 01/04/2018
23 730
31/03/2016
189,58 01/04/2019
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
9 873 07/03/2013
9 873 08/03/2013
189,90 08/03/2016
189,90 09/03/2016
10 287 06/03/2014
209,00 07/03/2017
10 287 07/03/2014
209,00 08/03/2017
10 204
12/03/2015
255,77
13/03/2018
6 803
13/03/2015
255,77
14/03/2018
1 345
2 973
31/03/2014
31/03/2015
223,03 01/04/2017
251,29 01/04/2018
14 957
17/03/2016
190,54
17/03/2019
9 971
18/03/2016
190,54
18/03/2019
14 169
11/08/2016
9 447
12/08/2016
211,87
11/08/2019
211,87
12/08/2019
6 846
31/03/2016
189,58 04/10/2019
Own shares
31/03/2016
189,58 01/04/2019
Nedbank Limited – Annual Report 2016
151
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Executive
directors
I Ruggiero
Nedbank restricted
shares
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
Number of
restricted
shares/
options
released
options
lapsed
shares/
Market price
Value
gained
at vesting
on vesting
lapsing
plans (7)
(R)
(R)
loss
on
(R)
respect of
Number of
all
restricted
shares/
options
(R)
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value of
Notional
value of
dividends
paid in
3 949 07/03/2013
3 949 08/03/2013
4 186 06/03/2014
4 186 07/03/2014
12/03/2015
4 457
13/03/2015
2 971
12/08/2015
7 959
13/08/2015
5 306
189,90 08/03/2016
189,90 09/03/2016
209,00 07/03/2017
209,00 08/03/2017
13/03/2018
255,77
14/03/2018
255,77
13/08/2018
263,84
14/08/2018
263,84
1 560
3 949
2 389
181,00
181,00
282 360
714 769
(432 409)
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
2 299
3 093
3 110
31/03/2013
31/03/2014
31/03/2015
195,66 01/04/2016
223,03 01/04/2017
251,29 01/04/2018
Own shares
31/03/2013
Own shares 01/04/2014
31/03/2015
Own shares
195,66 01/04/2016
223,03 02/04/2017
251,29 01/04/2018
18 893
12 595
17/03/2016
18/03/2016
190,54
190,54
17/03/2019
18/03/2019
2 299 01/04/2016
191,00 01/04/2016
4 598
191,00
878 218
–
7 780
31/03/2016
189,58 01/04/2019
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
Own shares
31/03/2016
189,58 01/04/2019
Total value of
dividends
Total
1
Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme at the vesting date. If CPTs are met, a 100% matching occurs, otherwise a
50% matching occurs.
2
3
4
Restricted share awards with time-based vesting only.
Match occurred at one shares for each in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme as at the vesting date.
For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares into the scheme. After three years, if the corporate targets are met, a 100%
matching occurs, otherwise a 50% matching occurs.
5 Value determined based on number of shares lapsing multiplied by the market share price on scheduling vesting date.
6 Eyethu restricted options have a lifespan of seven years from the date of issue.
7 Plans excludes Voluntary Bonus Share Scheme, which are own shares.
2 460 953
(432 409)
957 908
957 908
4 186
4 186
4 457
2 971
7 959
31/12/2016 07/03/2017
31/12/2016 08/03/2017
31/12/2017
13/03/2018
31/12/2017
14/03/2018
31/12/2017
13/08/2018
5 306
31/12/2017
14/08/2018
18 893
31/12/2018
17/03/2019
12 595
31/12/2018
18/03/2019
3 093
31/12/2016 01/04/2017
3 110
31/12/2017 01/04/2018
7 780
31/12/2017 01/04/2019
152
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors' emoluments (continued)
N3.4. Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2016
Awards made during 2016
Awards vesting/lapsing during 2016
Dividends
Closing balance at 31 December 2016
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Vesting
date
Number
of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Final
vesting/
exercise
date
Number of
restricted
shares/
options
released
Number of
restricted
shares/
options
lapsed
Market price
at vesting
(R)
Value
gained
on vesting
(R)
Notional
value of
loss
on
lapsing
(R)
Total value of
dividends
paid in
respect of
all
plans (7)
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
1 560
3 949
2 389
181,00
181,00
282 360
714 769
(432 409)
2 299
31/03/2013
195,66 01/04/2016
2 299 01/04/2016
191,00 01/04/2016
4 598
191,00
878 218
–
Own shares
31/03/2013
195,66 01/04/2016
1 533 01/04/2016
191,00 01/04/2016
3 066
191,00
585 606
2 460 953
(432 409)
957 908
957 908
4 186
4 186
4 457
2 971
7 959
5 306
18 893
12 595
31/12/2016 07/03/2017
31/12/2016 08/03/2017
13/03/2018
31/12/2017
14/03/2018
31/12/2017
13/08/2018
31/12/2017
14/08/2018
31/12/2017
17/03/2019
31/12/2018
18/03/2019
31/12/2018
3 093
3 110
7 780
31/12/2016 01/04/2017
31/12/2017 01/04/2018
31/12/2017 01/04/2019
Executive
directors
I Ruggiero
Nedbank restricted
shares
Compulsory Bonus
Share Scheme
Voluntary Bonus
Share Scheme
Total value of
dividends
Total
2
3
4
3 949 07/03/2013
3 949 08/03/2013
189,90 08/03/2016
189,90 09/03/2016
4 186 06/03/2014
209,00 07/03/2017
4 186 07/03/2014
209,00 08/03/2017
4 457
12/03/2015
255,77
13/03/2018
2 971
13/03/2015
255,77
14/03/2018
7 959
12/08/2015
263,84
13/08/2018
5 306
13/08/2015
263,84
14/08/2018
18 893
17/03/2016
190,54
17/03/2019
12 595
18/03/2016
190,54
18/03/2019
3 093
31/03/2014
223,03 01/04/2017
3 110
31/03/2015
251,29 01/04/2018
7 780
31/03/2016
189,58 01/04/2019
Own shares 01/04/2014
223,03 02/04/2017
Own shares
31/03/2015
251,29 01/04/2018
Own shares
31/03/2016
189,58 01/04/2019
1
Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme at the vesting date. If CPTs are met, a 100% matching occurs, otherwise a
50% matching occurs.
Restricted share awards with time-based vesting only.
Match occurred at one shares for each in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme as at the vesting date.
For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares into the scheme. After three years, if the corporate targets are met, a 100%
matching occurs, otherwise a 50% matching occurs.
5 Value determined based on number of shares lapsing multiplied by the market share price on scheduling vesting date.
6 Eyethu restricted options have a lifespan of seven years from the date of issue.
7 Plans excludes Voluntary Bonus Share Scheme, which are own shares.
Nedbank Limited – Annual Report 2016
153
N4 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
Own holdings
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
Nedbank Group Ltd
Prescient
Total
31 December 2016
1 000 000 000 shares
358 277 491 shares
Number of
shareholdings
Number of
shares
%
187
2 177
2 815
414
36
5 629
3,32
38,68
50,01
7,35
0,64
93 334
13 033 773
93 150 451
98 226 231
153 773 702
100,00
358 277 491
100,00
%
0,03
3,64
26,00
27,41
42,92
Number of
shareholdings
Number of
shares
%
5
61
70
3 577
22
6
5
97
1 544
29
166
4
1
42
0,09
1,08
1,24
63,55
0,39
0,11
0,09
1,72
27,43
0,51
2,95
0,07
0,02
0,75
28 128
4 007 601
8 829 717
87 981 564
26 004 002
6 996 140
678 052
74 274 083
76 187 680
955 657
26 364 054
1 973 800
37 300 000
6 697 013
%
0,01
1,12
2,46
24,56
7,26
1,95
0,19
20,73
21,26
0,27
7,36
0,55
10,41
1,87
5 629
100,00
358 277 491
100,00
Number of
shareholdings
10
1
3
6
5 619
5 629
%
0,18
0,02
0,05
0,11
Number of
shares
50 394 048
11 000
92 875
50 290 173
99,82
307 883 443
%
14,07
0,03
14,04
85,93
100,00
358 277 491
100,00
Number of
shares
50 290 173
23 377 440
73 667 613
%
14,04
6,52
20,56
154
Nedbank Limited – Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N4 Preference shareholders’ analysis (continued)
Major managers
Nedbank Group Ltd
Nedgroup Private Wealth (Pty) Ltd (SA)
Prescient Investment Management (SA)
Sanlam Investment Management (SA)
Investec Securities (Pty) Ltd
Grindrod Asset Management (SA)
Abax Investments (SA)
Outsurance Insurance Company Ltd (SA)
STANLIB Asset Management
PSG Konsult (SA)
Coronation Asset Management (Pty) Ltd (SA)
Peregrine Capital (Pty) Ltd
Ashburton Investments
Regent Insurance Company Ltd (SA)
Sasfin Asset Managers (Pty) Ltd
Number of
shares
Dec 2016
% holding
Dec 2015
% holding
37 300 000
35 975 371
31 954 509
21 918 062
14 797 245
12 771 828
9 174 861
7 589 720
6 371 444
5 394 912
5 087 724
5 049 713
5 013 243
4 848 485
3 941 924
10,41
10,04
8,92
6,12
4,13
3,56
2,56
2,12
1,78
1,51
1,42
1,41
1,40
1,35
1,10
9,90
2,98
6,30
4,16
2,85
2,61
2,12
3,14
1,61
11,36
0,87
0,66
1,35
1,01
Nedbank Limited – Annual Report 2016
155
Compliance with IFRS¹ – financial statement notes
Note
number Note description
Principal accounting policies
Key assumptions concerning the future and key sources of estimation
Standards issued but not yet effective
Segmental reporting
Dividends
Share capital
IFRS required
IAS² 1
IAS 1
IAS 8
IFRS 8
IAS 1 and IAS 10
IAS 1
Additional tier 1 capital instruments
IAS 32, IAS 39, IFRS 7 and IFRS 13
Net interest income
Non-interest revenue
Total operating expenses
Indirect taxation
Direct taxation
Deferred taxation
Non-trading and capital items
Loans and advances
Impairment of loans and advances
Government and other securities
Other short-term securities
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 12
IAS 12
IAS 1, IAS 16, IAS 36 and IFRS 10
IAS 17, IAS 39, IFRS 7, IFRS 8 and IFRS 13
IAS 39, IFRS 7 and IFRS 8
IAS 1, IAS 32, IAS 39, IFRS 7; IFRS 8 and
IFRS 13
IAS 1, IAS 39, IFRS 7, IFRS 8 and IFRS 13
Credit analysis of other short-term securities, and government and
other securities
IFRS 7
Cash and cash equivalents
Derivative financial instruments
Amounts owed to depositors
Long-term debt instruments
IAS 1, IAS 7 and IFRS 7
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 1, IAS 39, IFRS 7, IFRS 8 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
Contractual maturity analysis for financial liabilities
IFRS 7
Managed funds
Investment securities
Investments in private-equity associates, associate companies and joint
arrangements
IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 28, IFRS 11, IFRS 12 and IFRS 13
Investments in subsidiary companies and related disclosure
IAS 27, IFRS 10 and IFRS 12
Interests in structured consolidated and unconsolidated structured
entities
IFRS 12
Securitisations
Related parties
Property and equipment
Intangible assets
Long-term employee benefits
Non-current assets and liabilities held for sale
IAS 39, IFRS 7 and IFRS 13
IAS 24
IAS 16, IAS 36 and IFRS 13
IAS 38 and IAS 36
IAS 19 and IFRIC³ 14
IFRS 5 and IFRS 13
Other assets
IAS 1, IAS 39, IFRS 7 and IFRS 13
Consolidated statement of financial position – categories of financial
instruments
IAS 39 and IFRS 7
Fair-value measurement – financial instruments
Assets and liabilities not measured at fair value for which fair value is
disclosed
IAS 39, IFRS 7 and IFRS 13
IAS 39, IFRS 7 and IFRS 13
Financial instruments designated as at fair value through profit or loss
IAS 32, IAS 39, IFRS 7 and IFRS 13
Offsetting financial assets and financial liabilities
IFRS 7 and IAS 32
A1
A2
A3
B1
B2
B3
B4
B5
B6
B7
B8.1
B8.2
B8.3
B9
C1
C2
C3
C4
C5
C6
C7
D1
D2
D3
E
F1
F2
F3
F4
F5
F6
G1
G2
H1
H2
H3
I1
I2
I3
I4
I5
156
Nedbank Limited – Annual Report 2016
Note
number Note description
Collateral
Share-based payments
Provisions and other liabilities
IFRS required
IFRS 7
IFRS 2
IAS 37, IAS 32, IAS 39, IFRS 7 and IFRS 13
Contingent liabilities and undrawn facilities
IAS 37 and IAS 10
Commitments
Capital management
Liquidity gap
Interest rate repricing gap
Historical value at risk (99%, one-day ) by risk type
Cashflow information
Foreign currency conversion
Events after the reporting period
Preference shareholders' analysis
Worldclass at managing risk
IAS 37, IAS 10, IAS 17 and IFRS 7
IAS 1
IFRS 7
IFRS 7
IFRS 7
IAS 7
IAS 21
IAS 10
IAS 1
IFRS 7 and IFRS 13
I6
J
K1
K2
K3
L1
L2
L3
L4
M
N1
N2
N4
¹
²
³
International Financial Reporting Standards (IFRS).
International Accounting Standards (IAS).
International Financial Reporting Interpretations Committee (IFRIC).
Nedbank Limited – Annual Report 2016
157
Information to our shareholders
Notice of our annual general meeting
NEDBANK LIMITED (Incorporated in the Republic of South Africa) Reg No 1951/000009/06
JSE share code: NBKP ISIN: ZAE0000043667 (‘Nedbank or ‘the company’)
This notice is sent to holders of Nedbank non-redeemable
non-cumulative non-participating preference shares (‘perpetual
preference shares’) and the holders of the class A and class B
redeemable cumulative preference shares (‘redeemable
preference shares’) (the perpetual preference shares and
redeemable preference shares collectively ‘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 Friday, 24 March 2017, 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,
17 May 2017 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 JSE Ltd Listings Requirements.
Record date to receive the notice of the
annual general meeting
Friday,
24 March 2017
Last date to trade to be eligible to
participate in and vote at the annual
general meeting
Record date to be eligible to participate
in and vote at the annual general
meeting
Last date for lodging forms and proxy
with company secretary
Tuesday,
9 May 2017
Friday,
12 May 2017
Tuesday,
16 May 2017
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. 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, among others, the Directors’ Report and
Auditors’ Report, for the financial year ended
31 December 2016 are available at Nedbankgroup.co.za and
will be presented to the shareholders in terms of the
Companies Act. The summarised, audited annual financial
statements, together with the reports, are contained in the
2016 Nedbank Annual Report.
ORDINARY RESOLUTIONS
2 Ordinary resolution 1 – Election of directors of the
company appointed during the year
Subsequent to the Nedbank annual general meeting held on
4 May 2016, the board appointed Messrs EM Kruger and
RAG Leith as directors of the company. These directors retire
in terms of the company’s MOI and, being eligible, make
themselves available for election.
1.1 ‘ Resolved that Mr EM Kruger be and is hereby elected
as a director of the company.’
Independent non-executive Director
Qualifications: BCom
Expertise in banking and financial services
Errol joined the board as a non-executive director on
1 August 2016. He has extensive regulatory, banking and
financial services experience. From September 2003 to
July 2011 he was the Registrar of Banks at the South
African Reserve Bank (SARB), having been with SARB
from July 1978 until July 2011. As the Registrar of Banks,
Errol represented South Africa as a full member of the
Basel Committee on Banking Supervision from 2009 to
2011 and he successfully project-managed South Africa’s
early adoption and full implementation of both the
revised 25 Basel Core Principles for Effective Banking
Supervision and Basel II. Errol was appointed Managing
Director of Supervision and Authorisation at the Qatar
Financial Centre Regulatory Authority on 1 August 2011,
following which he was also appointed by the board of
the Qatar Central Bank to serve on Qatar’s Financial
Stability and Risk Control Committee. He relinquished his
role at the Qatar Financial Centre Regulatory Authority
on 31 July 2016.
Board committees: Group Credit Committee, Group Risk
and Capital Management Committee and Large-
exposure Approval Committee.
1.2 ‘ Resolved that Mr RAG Leith be and is hereby elected as
a director of the company.’
Non-executive Director
Qualifications: BCom(Hons), CA(SA)
Expertise in banking and financial services
Rob joined the board as non-executive director in
October 2016. He was appointed as the Director of
Managed Separation at Old Mutual plc (Nedbank
Group’s ultimate holding company) on 14 March 2016
after joining Old Mutual from a private investment
company, where he had been since September 2014.
Prior to that Rob was Global Head of Investment
Banking and Global Markets of Sberbank CIB. He joined
Sberbank CIB in January 2012 from Standard Bank,
where he had served for over 20 years in the UK, latterly
as Head of Group Strategic Development and Chief
Executive of Global Corporate and Investment Banking.
Board committees: Group Credit Committee, Group Risk
and Capital Management Committee and Large-
exposure Approval Committee.
The percentage of voting rights required for the passing
of each ordinary resolution contained under points 1.1
and 1.2 is more than 50% (fifty percent) of the voting
rights exercised in respect of each resolution.
158
Nedbank Limited – Annual Report 2016
3 Ordinary resolution 2 – Reelection of directors retiring
2.4 ‘ Resolved that Mr JK Netshitenzhe be and is hereby
by rotation
The following directors retire by rotation in terms of
clause 19.1 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 below.
2.1 ‘ Resolved that Mr MWT Brown be and is hereby
reelected as a director of the company.'
Chief executive
Qualifications: BCom, DipAcc, CA(SA), CD(SA), AMP
(Harvard)
Expertise in banking and financial services
Mike was appointed as Chief Financial Officer in June 2004
and as Chief Executive in March 2010. Mike was previously
an executive director of BoE 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: Group Credit Committee, Group Risk
and Capital Management Committee and Large-
exposure Approval Committee.
2.2 ‘ Resolved that Mr BA Dames be and is hereby reelected
as a director of the company’
Independent non-executive Director
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 Chief Executive of
African 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
Administrative Board of Sustainability Energy for All, as
a member of the World Economic Forum's Global
Council on Future of Energy, as a non-executive director
of the Industrial Development Corporation of South
Africa Ltd and as a member of the Sol Plaatjie University
Finance Committee.
Board committees: Group Credit Committee, Group
Information Technology and Large-exposure Approval
Committee.
2.3 'Resolved that Mr PM Makwana be and is hereby
reelected as a director of the company.'
Independent non-executive Director
Qualifications: BAdmin(Hons)
Expertise in Human Resources, Marketing,
Communications, 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, where 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, among these as a Trustee on the board of the
Nelson Mandela Children's Fund.
Board committees: Chairman of Group Remuneration
Committee. Member of Group Transformation, Social
and Ethics Committee, Group Information Technology
Committee, Group Audit Committee, Group Directors’
Affairs Committee, and Group Related Party
Transactions Committee.
reelected as a director of the company.’
Independent non-executive Director
Qualifications: BSc(Hons), MBA
Expertise in energy and resources. Large corporate and
industrial experience, doing business in Africa.
Joel joined the board as an independent non-executive
director in August 2010. He is currently an executive
director of the Mapungubwe Institute for Strategic
Reflection. 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 board
committees. 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. Joel
is also a non-executive director on the boards of Life
Healthcare Group Holdings Ltd and the Council for
Scientific and Industrial Research.
Board committees: Group Information Technology
Committee, Group Risk and Capital Management
Committee, Group Related-party Transactions
Committee.
The percentage of voting rights required for the passing
of each ordinary resolution contained under points 2.1 to
2.4 is more than 50% (fifty percent) of the voting rights
exercised on each resolution.
4 Ordinary resolution 3 – Reappointment of external
auditors
The Group Audit Committee considered the independence
of the joint external auditors on an ongoing basis during the
year and assessed the skills, reporting and overall
performance of Deloitte & Touche (with Mr L Nunes as
designated registered auditor, following the conclusion of
Mr Jordan’s term) and KPMG Inc (with Mr S Malaba as
designated registered auditor), and recommend their
reappointment as joint auditors of the group. It is proposed
that the appointments be made on a joint basis. If either
resolution 3.1 or resolution 3.2 is not passed, the resolution
that is passed will be effective.
3.1 ‘ Resolved that Deloitte & Touche be and is 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.’
3.2 ‘ Resolved that KPMG Inc be and is 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.’
The percentage of voting rights required for the passing
of each ordinary resolution contained under points 3.1
and 3.2 is more than 50% (fifty percent) of the voting
rights exercised on each resolution.
5 Ordinary resolution 4 – Placing the authorised but
unissued shares under the control of the directors
‘ 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, 71 of 2008
(as amended), the Banks Act, 94 of 1990 (as amended) and
the JSE Ltd Listings Requirements.’
The percentage of voting rights required for the passing of
this ordinary resolution is more than 50% (fifty percent) of
the voting rights exercised on this resolution.
Nedbank Limited – Annual Report 2016
159
NOTICE OF OUR ANNUAL GENERAL MEETING (continued)
for the year ended 31 December
6 Advisory endorsement of Remuneration Policy
‘To endorse through a non-binding advisory vote the
company’s Remuneration Policy (excluding the remuneration
of non-executive directors for their services as directors and
members of the board committees), as set out in the
Remuneration Report available at nedbankgroup.co.za.’
In accordance with the principle of King III, an advisory vote is
being put to shareholders for the endorsement of Nedbank’s
Remuneration Policy. As the votes on this resolution are non-
binding, the results would not be binding on the board. However,
the board will consider the outcome of the vote when
considering its Remuneration Policy in future.
SPECIAL RESOLUTIONS
7 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
available at nedbankgroup.co.za, be and are hereby
approved’.
The percentage of voting rights required for the passing of
special resolution 1 is more than 75% (seventy-five percent)
of the voting rights exercised on each resolution.
8 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 (as amended) (’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:
■ the financial assistance can be provided to any related or
interrelated company (and any person ‘related’ to such
company) 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 this approval will limit the provision by the
company of financial assistance that does not require
approval by way of a special resolution of the
shareholders in terms of sections 44 and 45 of the
Companies Act or falls within any exemption provided in
these sections.’
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 sections 44(3)(b)(i) and 45(3)(b)(i) of the Companies Act,
respectively, and that the terms under which such financial
assistance is to be given are fair and reasonable to the
company, as referred to in sections 44(3)(b)(i) and 45(3)(b)(ii)
of the Companies Act.
The directors would like the authority to be able to provide
financial assistance to companies ‘related’ and ‘interrelated’ to
the company and persons related to such companies, including
for the acquisition of securities issued by the company and
related companies, where they regard it desirable. 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. The extension of this authority
to ’any other person‘ is for the sole purpose of facilitating to
mechanics of Nedbank’s preference share business.
The percentage of voting rights required for the passing of
special resolution 2 is more than 75% (seventy-five percent) of
the voting rights exercised on this resolution.
9 Special resolution 3 – Amendment to clause 13.9 of
the MOI in relation to the treatment of fractions
‘Resolved that the memorandum of incorporation of the
company be amended by the deletion and replacement of
the existing clause 13.9 with the wording as follows:
13.9
If security holders would, on any capitalisation issue
(for the sake of clarity, reference to a capitalisation
issue will have its ordinary meaning and include the
issue of ‘scrip dividends’ contemplated in the JSE Ltd
Listings Requirements), consolidation, distribution
or unbundling of securities would, but for the
provisions of the clause, become entitled to fractions
of securities, such fractions will be treated in
accordance with the JSE Ltd Listings Requirements
as amended from time to time.’
Explanatory information in respect of special
resolution 3
Special resolution 3 is proposed to facilitate the amendment to
the MoI to include the latest amendments to the JSE Ltd
Listings Requirements in relation to the treatment of fractions.
The percentage of voting rights required for the passing of
special resolution 3 is more than 75% (seventy-five percent) of
the voting rights exercised on this resolution.
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 stead. A proxy need
not be a shareholder of the company. Completed proxy forms
must please be received at the office of the company secretary
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
31 March 2017
Sandown
Approved by the board on 17 March 2017
Registered office
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
160
Nedbank Limited – Annual Report 2016
Form of proxy
Nedbank Limited
(Incorporated in the Republic of South Africa)
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 note 1):
1
2
or failing him/her
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, 17 May 2017, 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
1.1 Election of Mr EM Kruger, who was appointed as a non-executive director since the
previous annual general meeting of shareholders
1.2 Election of Mr RAG Leith, who was appointed as a non-executive director since the
previous annual general meeting of shareholders
ORDINARY RESOLUTION 2
2.1 Reelection as a director of Mr MWT Brown, who is retiring by rotation
2.2 Reelection as a director of Mr BA Dames, who is retiring by rotation
2.3 Reelection as a director of Mr PM Makwana, who is retiring by rotation
2.4 Reelection as a director of Mr JK Netshitenzhe, who is retiring by rotation
ORDINARY RESOLUTION 3
3.1 Appointment of Deloitte & Touche as external auditors
3.2 Appointment of KPMG Inc as external auditors
ORDINARY RESOLUTION 4
4.1 Placing of authorised but unissued shares under the control of the directors
5 Advisory endorsement of Remuneration Policy
Special resolutions
SPECIAL RESOLUTION 1
6 Remuneration of non-executive directors
SPECIAL RESOLUTION 2
7 General authority to provide financial assistance to related and interrelated
companies
SPECIAL RESOLUTION 3
8 Amendment to clause 13.9 of the MOI in relation to the treatment of fractions
On a show of hands a person entitled to vote is entitled to only 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 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, 17 May 2017, at 16:30 or at any
adjournment thereof, unless it is revoked earlier.
Signed at (place)
Signature
Assisted by me
(where applicable)
Please read the notes on the reverse side hereof.
on (date)
2017
Nedbank Limited – Annual Report 2016
161
Notes to form of proxy
Summary of the rights of a holder to be represented by proxy as contained in section 58 of the Companies
Act, 71 of 2008 (as amended), and notes to the form of proxy.
1
Each holder entitled to attend and vote at the annual general meeting is entitled to appoint one or more individuals as proxy/
proxies [who need not be person(s) entitled to vote at the annual general meeting] to attend, participate in, speak and vote or
abstain from voting in place of that holder at the annual general meeting.
2
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
5
6
7
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.
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 abstain from voting at the annual general meeting, without direction as he/
she/they deem(s) fit, in respect of all the holder’s votes exercisable thereat.
A holder or his/her proxy/proxies is/are not obliged to vote in respect of all the ordinary shares held by such holder or represented
by such proxy/proxies, but the total number of votes for or against the ordinary and special resolutions and in respect of which
any abstention is recorded may not exceed the total number of votes to which the holder or his/her proxy/proxies is/are entitled.
Documentary evidence establishing the authority of a person signing this form of proxy in a representative capacity has to be
attached to this form of proxy, unless previously recorded by the company secretary 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 must be initialled by the signatory/signatories.
9
The completion and lodging of this form of proxy will not preclude the relevant holder from attending the annual general meeting
and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof, should such holder wish to do
so, in which case this proxy will be suspended accordingly.
10 Forms of proxy have to be lodged with or posted to the Company Secretary's office (for the attention of Jackie Katzin, Ground
Floor, Block A, Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, Sandton, 2196, PO Box 1144, Johannesburg, 2000)
before a proxy/proxies may exercise any voting rights of a holder at the annual general meeting. The forms of proxy are requested
to be received no later than 08:30 on Tuesday, 16 May 2017.
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 of this annual general meeting.
12 Holders of Nedbank ordinary shares (whether certificated or dematerialised) through a nominee, should timeously make the
necessary arrangements with that nominee or, if applicable, participant (previously referred to as central securities depository
participant) or broker on how they wish their votes to be cast on their behalf at the annual general meeting. As far as holdings in
a participant are concerned, these will be guided by the terms of the agreement entered into between shareholders and their
participant or broker.
13 Holders attending the annual general meeting on 17 May 2017 will be afforded the opportunity of putting questions to the
directors and management.
14 If this form of proxy has been delivered to the company in accordance with paragraph 10, and as long as that appointment
remains in effect, any notice that is required by the Companies Act or the company's memorandum of incorporation to be
delivered by the company to a holder must be delivered by the company to the holder or, alternatively, if a holder has directed the
company to do so in writing and has paid any reasonable fees charged by the company for doing so, to such holder’s proxy/
proxies.
15 Except 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 the attention of Jackie Katzin, to be received before the replacement proxy/proxies exercise(s)
any rights of the holder at the annual general meeting of the company or any adjournment thereof.
16 The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy's/proxies' authority to act on
behalf of the holder as of the later of: (i) the date stated in the revocation instrument, if any; or (ii) the date on which the
revocation instrument was delivered, as required in paragraph 15 above.
162
Nedbank Limited – Annual Report 2016
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
INSTRUMENT CODES
Nedbank Limited non-redeemable
non-cumulative preference shares
JSE share code
ISIN
NBKP
ZAE000043667
Company Secretary: TSB Jali
Sponsors:
Investec Bank Ltd,
Nedbank CIB
This document 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.
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.