NEDBANK LIMITED
ar
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 highlights
Headline earnings of R11 311m
▲ 11,5% in 2017 (R10 143m in 2016)
NIR/expenses ratio 76,0%
(76,6% in 2016)
Return on equity 17,8%
(17,3% in 2016)
Common-equity tier 1 ratio 12,6%
(11,7% in 2016)
Credit loss ratio 47 bps
(67 bps in 2016)
Return on assets 1,29%
(1,20% in 2016)
Contents
About this report
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 Limited
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
Indirect taxation
B1
B2
B3
B4
B5
B6
B7
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
E
Managed funds
2
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
40
42
43
43
50
53
53
54
54
55
60
60
61
62
64
64
Section F: Investments
F3
F1
F2
Investment securities
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 and liabilities 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 risk in the banking book
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
Nedbank Limited – Annual Report 2017
65
65
65
70
73
74
76
79
80
84
88
88
95
95
96
104
108
124
125
128
130
132
133
136
136
138
139
140
140
140
141
142
142
142
143
144
145
145
147
147
147
148
158
159
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 property and equipment, and
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 interest rate risk in the banking book.
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 2017
Nedbank Limited – Annual Report 2017
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
2017
2016
11 160
(151)
(210)
59
9 896
(247)
(289)
42
11 311
10 143
3,57
0,47
44,1
58,1
67 425
17,8
706 613
903 961
1,29
3,41
0,67
44,1
57,6
61 908
17,3
718 901
900 061
1,20
431 207
425 405
12,6
13,8
16,7
11,7
12,9
16,0
27,9
358,3
40 575
27,9
358,3
36 355
86,56389
86,74290
43,39039
42,75385
43,17350
43,98905
87,37944
82,77096
840
955
820
50,0
925
960
810
107,2
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 2017
Headline earnings
(Rm)
Expenses and efficiency ratio
(Rm)
Expenses (Rm)
Efficiency ratio (%)
12 000
10 000
8 000
6 000
4 000
2 000
0
9
6
4
5
3
2
8
3
8
3
8
3
1
3
5
5
0
6
4
6
9
8
1
7
7
7
0
8
5
7
2
8
3
4
1
0
1
1
1
3
1
1
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
30 000
25 000
20 000
15 000
10 000
5 000
0
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
1
0
6
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
2
9
1
6
2
1
,
8
5
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
%
80
60
40
20
0
Total equity
(Rbn)
Total assets and return on total assets
(Rbn)
Total assets (Rbn)
Return on total assets (%)
90
75
60
45
30
15
0
,
4
6
3
,
0
8
3
,
4
8
3
,
0
3
4
,
3
7
4
7
,
1
5
,
0
6
5
,
0
0
6
,
7
7
6
,
2
4
7
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
1 000
800
600
400
200
0
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
4
0
9
3
,
1
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
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 (%)
%
1,5
1,2
0,9
0,6
0,3
0
%
50
5
4
3
2
1
0
8
3
,
5
3
,
,
2
3
,
2
3
4
3
,
4
3
,
5
3
,
3
3
,
4
3
,
6
3
,
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
20 000
15 000
10 000
5 000
0
40
30
20
10
0
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
7
0
9
9
1
1
,
4
4
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Nedbank Limited – Annual Report 2017
5
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
Nine-year
CAGR¹
%
2,9
1,6
5,7
(4,9)
8,6
8,1
8,4
8,4
10,3
8,2
>(100,0)
6,9
Share of (losses)/profits of associate companies and joint arrangements
>(100,0)
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
1 Compound annual growth rate.
2017
71 311
46 111
25 200
3 030
22 170
19 907
42 077
26 192
858
15 027
(210)
14 817
(96)
14 721
3 563
11 158
6,8
7,9
6,5
6,9
11 160
>(100,0)
>(100,0)
6,5
8,4
(2)
11 158
11 311
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
6
Nedbank Limited – Annual Report 2017
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
1 Compound annual growth rate.
Nine-year
CAGR¹
%
2,9
1,6
5,7
(4,9)
8,6
8,1
8,4
8,4
10,3
8,2
6,9
6,8
7,9
6,5
>(100,0)
2017
71 311
46 111
25 200
3 030
22 170
19 907
42 077
26 192
858
15 027
(210)
14 817
(96)
14 721
3 563
11 158
(2)
11 158
11 311
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
6,9
11 160
>(100,0)
>(100,0)
6,5
8,4
Share of (losses)/profits of associate companies and joint arrangements
>(100,0)
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
Nedbank Limited – Annual Report 2017
7
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
8 823
73 472
30 698
48 749
20 241
68 218
18 044
50 687
18 151
60 078
30 948
42 733
689 637
691 925
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
7 332
75
2 250
388
3 277
37
7 976
5 761
18 145
7 341
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
903 961
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
28
19 182
48 215
67 425
3 561
2 600
7
561
74 154
23 561
28
19 182
42 698
61 908
3 561
2 000
28
18 532
37 610
56 170
3 561
253
223
183
141
136
121
110
67 722
13 469
59 954
33 996
736 752
750 319
708 036
634 623
585 497
542 671
516 540
491 038
467 924
464 082
14 047
12 717
191
351
3 423
51 482
53
391
3 328
52 062
9 911
87
763
3 009
44 977
829 807
832 339
800 779
697 464
647 480
598 064
570 553
538 090
506 997
510 690
903 961
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
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
55 980
15 479
51 675
16 588
8 404
10 016
35
287
3 002
35 634
13
297
1 804
33 265
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
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
6 179
76
1 358
1 408
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
29 439
26 101
20 082
14 060
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
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
1 Compound annual growth rate.
Nine-year
CAGR¹
%
1,6
24,2
3,2
1,7
5,2
5,0
(14,7)
(2,2)
50,2
15,3
(7,0)
(100,0)
7,6
14,8
6,8
10,5
5,7
0,4
3,2
12,3
8,9
1,5
(45,5)
7,2
8,2
0,2
5,3
9,6
5,6
(17,5)
12,1
15,5
5,5
5,7
8
Nedbank Limited – Annual Report 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Investments in private-equity associates, associate companies
Long-term employee benefit assets
Mandatory reserve deposits with central banks
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
and joint arrangements
Deferred taxation assets
Investment property
Property and equipment
Intangible assets
Total assets
Equity and liabilities
Ordinary share capital
Ordinary share premium
Reserves
Preference share capital and premium
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
Deferred taxation liabilities
Long-term employee benefit liabilities
Long-term debt instruments
Total liabilities
Total equity and liabilities
1 Compound annual growth rate.
Total equity attributable to equity holders of the parent
Nine-year
CAGR¹
1,6
24,2
3,2
1,7
5,2
5,0
(14,7)
(2,2)
50,2
15,3
(7,0)
(100,0)
7,6
14,8
6,8
10,5
5,7
0,4
3,2
12,3
8,9
1,5
(45,5)
7,2
8,2
0,2
5,3
9,6
5,6
(17,5)
12,1
15,5
5,5
5,7
8 823
73 472
30 698
48 749
7 332
75
2 250
388
3 277
37
7 976
5 761
18 145
7 341
28
19 182
48 215
67 425
3 561
2 600
7
561
74 154
23 561
191
351
3 423
51 482
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
53
391
3 328
52 062
18 151
60 078
30 948
42 733
3 925
904
1 648
2
1 400
67
8 114
4 885
16 190
4 881
28
18 532
37 610
56 170
3 561
59 954
33 996
9 911
87
763
3 009
44 977
14 047
12 717
%
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
689 637
691 925
666 807
603 329
566 047
520 116
493 107
471 447
446 428
436 420
10 757
56 322
15 644
26 828
17 467
35 004
13 811
31 279
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
5 393
236
2 369
16
1 158
165
7 459
4 409
14 843
4 516
4 204
340
2 932
12
1 098
69
87
6 571
2 847
13 199
4 188
4 528
241
2 832
508
1 029
362
84
6 171
1 992
12 641
3 830
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
903 961
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
27
17 422
34 787
52 236
3 561
27
17 422
30 524
47 973
3 561
27
17 422
26 140
43 589
3 561
27
14 422
24 856
39 305
3 561
27
14 422
20 281
34 730
3 560
253
223
183
141
136
121
110
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
736 752
750 319
708 036
634 623
585 497
542 671
516 540
491 038
467 924
464 082
8 404
10 016
35
287
3 002
35 634
13
297
1 804
33 265
9 273
67
367
1 880
30 295
8 286
27
997
1 473
6 179
76
1 358
1 408
5 218
162
1 514
1 298
6 145
117
1 982
1 227
29 439
26 101
20 082
14 060
829 807
832 339
800 779
697 464
647 480
598 064
570 553
538 090
506 997
510 690
903 961
900 061
860 733
753 444
699 155
645 350
613 540
576 490
544 990
547 132
Nedbank Limited – Annual Report 2017
9
Consolidated annual financial statements
Nedbank Limited Reg No 1951/000009/06.
Prepared under the supervision of the Nedbank Group CFO, Raisibe Morathi CA(SA).
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 Limited
(comprising the statement of financial position at 31 December 2017, 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 the consolidated annual financial statements
The consolidated annual financial statements of Nedbank Limited, as identified in the first paragraph, were approved by the
Nedbank Limited Board of Directors on 1 March 2018 and are signed on its behalf by:
V Naidoo
Chairman
Sandown
1 March 2018
MWT Brown
Chief Executive
10
Nedbank Limited – Annual Report 2017
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
Limited has filed with the Commissioner all such returns and notices as are required by the Companies Act, 71 of 2008, and that all
such returns and notices are true, correct and up to date.
TSB Jali
Company Secretary
Sandown
1 March 2018
Nedbank Limited – Annual Report 2017
11
Report from the Group Audit Committee
‘The Nedbank Group Audit Committee (’GAC’) is pleased to present its report for the 2017 financial year.
This report has been prepared based on the requirements of the SA Companies Act, 71 of 2008, as
amended (’Companies Act’), the King Code of Governance for SA (’King IV’), the JSE Listings
Requirements and other applicable regulatory requirements. The committee carried out its
responsibilities, including those relating to the audit and financial reporting obligations of the group,
as set out in its board-approved charter.’
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
Members of the committee satisfy the requirements to serve
as members of an audit committee, as provided in section 94
of the Companies Act, and have adequate knowledge and
experience to carry out their duties. The composition of the
committee and the attendance at the meetings by its members
for the 2017 financial year are set out below:
Members
S Subramoney (Chair)
MI Wyman (Chair)
NP Mnxasana
PM Makwana
HR Brody
NP Dongwana
TA Boardman
* Apologies received.
Attendance
25 July 2017
9/9
1/1
8/9*
8/9*
6/7*
7/7
0/1*
During the year Stanley Subramoney was appointed Chair of
the GAC, replacing Malcolm Wyman, who was Chair for the
May 2017 meeting. Malcolm Wyman remains on the Nedbank
Board as the lead independent director. In addition,
Neo Dongwana and Hubert Brody were appointed during the
year and Tom Boardman was no longer a member of the
committee following his resignation from the board.
All members of the GAC are independent non-executive board
members. Stanley Subramoney was a member of the GAC
from October 2015 and held several introductory engagements
with members of the committee, management and the
external auditors to familiarise himself with the objectives of
the committee and set out his agenda for the 2017 reporting
period.
The Chief Executive (CE), the Chief Financial Officer (CFO), the
Chief Operating Officer (COO), the Chief Risk Officer (CRO),
the Chief Internal Auditor (CIA), the Chief Governance and
Compliance Officer and representatives of the external
auditors are invited to attend all GAC meetings. Other
members of management are invited to attend certain
meetings 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.
Nine GAC meetings were held in respect of the 2017 financial
year, aligned with the key reporting and regulatory timelines,
and included three additional ad hoc meetings. The meetings’
key focus areas were:
17 May 2017
31 May 2017
Review of Nedbank Limited Banks Act Returns
audit report and approval and discussion of the
2016 external audit strategy presentation.
Review of first-quarter results update.
Annual trilateral meeting with representatives
of the Bank Supervision Department of the
South African Reserve Bank for discussion of,
among other things, key external audit findings,
internal audit matters and reporting
responsibilities in terms of the regulations.
Review of the interim results for the six months
to 30 June 2017 and the press and SENS
announcements.
20 September
2017
Ad hoc meeting to review and discuss the
report and findings of KPMG International
(KPMGI) in respect of KPMG South Africa
(KPMG SA).
22 September
2017
Followup ad hoc meeting in respect of the
KPMG matter.
25 October
2017
Review and approval of the Nedbank Group
Internal Audit Plan for 2018. Review and
approval of key financial policies.
Review of financial performance for the third
quarter of 2017.
18 January
2018
Review of unaudited preliminary results and key
financial and accounting judgements.
14 February
2018
20 February
2018
Ad hoc joint Group Credit Committee (GCC)
and GAC meeting to review key financial
accounting audit matters relating to IFRS 9
implementation.
Discussion and review of year-end reports from
Internal Audit and the external auditors,
feedback from subsidiary audit committees,
the GCC Risk Committee, Information
Technology Committee and other relevant
committees. Review and approval of annual
financial statements and related SENS and
results announcements.
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 believes 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 all its committees.
The latest review concluded that the committee continued to
operate effectively and successfully discharged its
responsibilities and duties.
12
Nedbank Limited – Annual Report 2017
Significant audit matters
The GAC has considered the appropriateness of the key audit matters reported in the external audit opinion and considered the
significant audit matters relating to the annual financial statements and how these were addressed by the committee:
Significant
matter¹
How the GAC addressed the matter
Impairment of loans
and advances
The GAC reviewed and discussed the reports from the GCC regarding the level and appropriateness of
impairments, provisioning methodologies and related key judgements in determining the impairment
balances.
Valuation of financial
instruments held at
fair value
The GAC reviewed reports from the CFO regarding the Investment Committee‘s review of investment
valuations and details of critical valuation judgements applied to the valuation of group treasury and
trading instruments.
Associate investment
in ETI
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 the impairment indicators and
potential value-in-use (VIU) calculations. The GAC noted the improved financial performance of ETI
during the 2017 reporting period and management’s assessment that no adjustment of the impairment
provision is required, based on observable indications that the impairment loss previously recognised no
longer exists or may have decreased.
Fraud risk in relation to
revenue recognition –
non-interest revenue
Previously reported as an audit focus area, this was classified by the external auditors as a significant
audit matter following updates to the audit approach. The GAC received regular feedback from the
CFO in connection with controls over the financial reporting system and, where applicable, key
judgements applied in the recognition of revenue.
Fraud risk in relation to
management override
of controls
Previously reported as an audit focus area, this was classified by the external auditors as a significant
audit matter following updates to the audit approach. The GAC received regular feedback from the
CFO in connection with key judgements applicable to management estimates and from Group Internal
Audit in connection with the overall control environment and the ’tone at the top’.
¹
The significant matter: ’Associate investment in ETI’ relates only to the consolidated results of Nedbank Group Limited while the other significant matters relate
to Nedbank Limited, Nedbank Limited consolidated and Nedbank Group Limited.
Financial, legal, compliance and regulatory reporting
requirements
■ The GAC received regular reports from the CFO regarding
the financial performance of the group, the tracking and
monitoring of key performance indicators, details of
budgets, forecasts, long-term plans and capital
expenditures, financial reporting controls and processes, and
the adequacy and reliability of management information
used during the financial reporting process. The GAC is
satisfied with the appropriateness of the expertise and
experience of the CFO and the resources, 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 financial regulatory reports by the external
auditors.
■ The GAC reviewed the compliance monitoring plan,
compliance methodology and structure and the compliance
charter.
■ It also reviewed, with management, legal matters that could
have a material impact on the group.
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 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 Transformation, Social and
Ethics Committee, Group Remuneration Committee, Group
Risk and Capital Management Committee and the
Directors’ Affairs Committee.
■ The GAC recommended to the board that the annual
financial statements and the financial information included
in the integrated report be approved. The board
subsequently approved the annual financial statements and
the integrated report, which will be open for discussion at
the forthcoming annual general meeting.
■ The GAC reviewed the solvency and liquidity tests and
recommended the interim and final dividend proposals for
approval by the board.
■ The GAC, together with the GCC, reviewed and approved
the high-level project plan and progress updates on the
implementation of IFRS 9.
Future accounting developments
The International Accounting Standards Board (IASB)
published IFRS 9: Financial Instruments, IFRS 15: Revenue from
Contracts with Customers and IFRS 16: Leases with an
effective date of implementation of 1 January 2018 for IFRS 9
and IFRS 15, and 1 January 2019 for IFRS 16.
Nedbank Limited – Annual Report 2017
13
REPORT FROM THE GROUP AUDIT COMMITTEE (continued)
The IFRS 9 Impairments Implementation Programme, jointly
sponsored by the CRO and CFO, continued to progress during
2017 and facilitated the implementation of IFRS 9. The
classification and measurement and hedging requirements
programme is sponsored by the CFO, and is aligned with the
Impairments Implementation Programme. Regular feedback
during 2017 was provided to the GCC and received by the GAC
from the IFRS 9 Impairments Implementation Committee to
understand and remain abreast of key judgement areas.
A joint ad hoc GCC and GAC meeting was held on 14 February
2018 to review management’s IFRS 9 opening balance
assessment, including related calculations, model and system
changes and key judgements. The joint meeting also received
a report from the external auditors detailing their procedures
and findings in respect of the IFRS 9 opening balance
assessment. The GAC was satisfied that the IFRS 9 opening
balance impact disclosed in the annual financial statements is
appropriate. The GAC noted that, as the statement is
effective on 1 January 2018, the disclosures in the 2017 annual
financial statements would be preliminary and that further
detailed disclosures will be made in the interim financial
statements and annual financial statements for the 2018
period.
Internal control, risk management and information
technology
The GAC is responsible for reviewing the effectiveness of
systems for internal control, financial reporting and risk
management, and for 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
system controls and from the Group Credit Committee
regarding its oversight of the adequacy and effectiveness
of the credit monitoring processes and systems.
The GAC 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 Chief Internal
Auditor has a functional reporting line to the GAC Chair and
an operational reporting line to the CRO. At the beginning of
the period the Chief Internal Auditor resigned from Nedbank
to pursue her personal interests and an interim executive was
appointed. Following an extensive recruitment process that
involved the Chair of the GAC, Prabashni Naidoo was
appointed CIA. Ms Naidoo was previously a senior executive at
an SA bank and has strong risk management and internal
audit skills and experience.
■ The GAC reviewed and approved the annual Internal Audit
Charter and evaluated the independence, effectiveness
and performance of the Internal Audit Department and
compliance with its charter.
■ With respect to its evaluation of the adequacy and
effectiveness of internal controls, the GAC received reports
from the CIA, assessed the effectiveness of the group
internal audit function and reviewed and approved the
annual Group Internal Audit Plan.
■ It also considered the independent quality assurance review
of audit execution by PwC, the results of which confirmed
that Internal Audit had generally conformed with the
International Institute of Internal Auditors’ standards for
professional practice of internal auditing.
In particular the GAC:
■ ensured that the CIA had a direct reporting line to the
Chair of the GAC and noted the operational and
administrative reporting line to the CRO;
■ satisfied itself of the expertise, resources and experience
of the CIA;
■ reviewed and approved the Internal Audit Charter;
■ 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.
The GAC is satisfied with the appropriateness of the
expertise, experience and resources of the internal audit
function.
External auditors
The GAC is responsible for the appointment, compensation
and oversight of the external auditors for the group, namely
Deloitte & Touche and KPMG.
During the period the GAC:
■ considered and recommended to the board the
reappointment of the joint external auditors Deloitte &
Touche (with Lito Nunes as designated registered auditor)
and KPMG (with Sipho Malaba as designated registered
auditor) and the approval of their audit fees for the 2017
year under review;
■ assessed and monitored allegations of corruption against
the external auditors and received positive declarations
from the firms;
■ 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;
■ 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, with
the annual review of the quality of the audit and the
performance of the joint external auditors having been
undertaken by means of questionnaires completed by
key finance staff, Internal Audit members and members
of the GAC;
■ ensured that the appointment and the independence of
the external auditors were in compliance with the
Companies Act and all other regulatory and legal
requirements, which included receiving from the auditors
all decision letters and explanations issued by the
Independent Regulatory Board for Auditors or any other
regulator, and any summaries relating to monitoring
procedures or deficiencies (if applicable) issued by the audit
firm to confirm the suitability for appointment of the audit
firms and designated individual partners;
14
Nedbank Limited – Annual Report 2017
The coordinated assurance model allows assurance providers
to leverage off each other’s insight and intelligence to enhance
efficiency and effectiveness of the risk management system
and better align with the principles and standards of King IV.
The model also ensures that assurance providers issue clear
and concise, yet detailed, reports that enable management
and directors to make informed and proper decisions. The
GAC is, therefore, of the view that the arrangements in place
for the coordinated assurance model are adequate and
achieve the objective of a more effective, integrated approach
across the disciplines of risk management, compliance and
audit. The journey of coordinated assurance will continuously
evolve as the process matures within the organisation.
Key focus areas for 2018
■ 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 the developments of the independent review
of KPMG SA being led by SAICA and assessing the impact
on Nedbank and its auditors.
■ Consideration of the requirements arising from MAFR and
initiation of a project to assess and address the MAFR
requirements.
■ Monitoring of the developments of the Old Mutual
managed-separation process, including the reporting of
external financial information and the additional external
audit reviews required in terms of the Listing Requirements
of the JSE and London Stock Exchange.
■ Review and consideration of management’s plans in
respect of IFRS 16: Leases.
Conclusion
The GAC is satisfied that it has complied with all statutory
duties as well as other duties given to it by the board under its
terms of reference.
The GAC reviewed the group annual financial statements for
the year ended 31 December 2017 and recommended them for
approval to the board on 20 February 2018.
On behalf of the GAC
Stanley Subramoney
Group Audit Committee Chair
1 March 2018
■ confirmed that no reportable irregularities were identified
and reported by the external auditors in terms of the
Auditing Profession Act, 26 of 2005;
■ considered reports from subsidiary audit committees and
from management on the activities of subsidiary entities;
and
■ reviewed the findings and recommendation of the external
auditors and confirmed that there were no unresolved
matters.
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.
During the second half of the year, the GAC challenged and
engaged with executives and boardmembers from KPMG
regarding the allegations of corruption against the audit firm.
At least two ad hoc GAC meetings and several separate
engagements with the board and stakeholders have taken
place to discuss the KPMG developments and assess the
impact on Nedbank. The GAC considered, inter alia, regulatory
requirements, business continuity and reputational and
systematic risk. KPMG SA provided assurance regarding the
integrity of its audit processes and further assurance was
provided by KPMGI, which agreed, at the request of Nedbank,
to provide additional comfort in respect of its support of
KPMG SA.
The GAC is awaiting the results of the independent inquiries
into KPMG SA to assess if any further action or response is
required.
The GAC engaged with senior management from Deloitte
about the negative press regarding a client. The GAC is
awaiting the result of the Independent Regulatory Boards of
Auditors (IRBA) investigation.
IRBA has issued a rule prescribing that auditors of public
interest entities (PIEs) in SA must comply with mandatory
audit firm rotation (MAFR) with effect from 1 April 2023. IRBA
has reported that the application of such a rule is to
strengthen the independence of auditors from their clients.
Deloitte & Touche and KPMG have been the auditors of
Nedbank Group for 44 years and would be impacted by the
MAFR rules. The GAC noted the new MAFR rule and initiated
preliminary discussions on the potential impact on Nedbank.
As part of Nedbank’s transformation commitment and the
development of the auditing profession, several mid-tier
black-owned accounting firms were appointed as auditors to
a number of smaller statutory audits in 2016. The audits,
comprising different mandates, were concluded satisfactorily
during the year.
Combined assurance
Nedbank’s combined assurance programme evolved into a
fully coordinated assurance model across the group during
2017. The key principles dictate that assurance providers
across all lines of defence focus on integrating and aligning
the assurance processes and reporting in the group to obtain
optimal insight into the management of strategic and
business operational risks as well as the overall risk profile of
the bank (taking into account the current risk, governance and
control efforts).
Nedbank Limited – Annual Report 2017
15
Directors’ Report
for the year ended 31 December 2017
The board of directors is pleased to present the annual financial
statements of Nedbank Limited for the year ended
31 December 2017.
Nature of business
Nedbank Limited (’Nedbank’ or ’the company’) is a registered
bank that, through its subsidiaries, provides a wide range of
banking and financial services. Nedbank maintains a primary
listing of its non-redeemable, non-cumulative, non-
participating preference shares under ’Preference Shares’ on
JSE Limited (’the JSE’).
Annual financial statements
Details of the financial results are set out on pages 22 to 159 of
the annual financial statements, which have been prepared
under the supervision of the Nedbank Chief Financial Officer,
Mrs RK Morathi, and audited in compliance with International
Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and IFRS
Interpretation Committee (IFRS IC), South African Institute of
Chartered Accountants (SAICA) Financial Reporting Guides as
issued by the Accounting Practices Committee, Financial
Pronouncements as issued by the Financial Reporting
Standards Council, the requirements of the Companies Act,
71 of 2008 (as amended) and the JSE Listings Requirements.
Year under review
The year under review is fully covered in the Reflections from
our Chairman, Reflections from our Chief Executive and
Reflections from our Chief Financial Officer sections of the
2017 Nedbank Group Limited 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 is Nedbank Group Limited
(’Nedbank Group’), whose holding company is Old Mutual Life
Assurance Company (SA) Limited and associates. Nedbank
Group holds 100% of the issued ordinary shares of the
company. The ultimate holding company is Old Mutual plc,
incorporated in England and Wales. Further details of
preference shareholders appear in note N4 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
Board of Directors section of the Nedbank Group Limited
Integrated Report, available at nedbankgroup.co.za. 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:
■ David Adomakoh resigned as independent non-executive
director on 18 May 2017;
■ Tom Boardman resigned as independent non-executive
director on 18 May 2017;
■ Neo Dongwana was appointed as independent non-
executive director on 1 June 2017;
■ Linda Manzini was appointed as independent non-executive
director on 1 June 2017; and
■ Hubert Brody was appointed as independent non-executive
director on 1 July 2017.
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.
Neo Dongwana, Linda Manzini and Hubert Brody were
appointed by the board of directors since the previous Nedbank
annual general meeting on 17 May 2017, and in terms of the
memorandum of incorporation their appointments terminate
at the close of the annual general meeting to be held on 8 May
2018. They are available for election. Mantsika Matooane, Vassi
Naidoo and Mfundo Nkuhlu 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 8 May 2018.
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 unless
otherwise agreed by the board. Nomavuso Mnxasana was
appointed to the board on 1 October 2008 and will retire at the
conclusion of the Nedbank Group annual general meeting on
10 May 2018.
16
Nedbank Limited – Annual Report 2017
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
HR Brody
MWT Brown
BA Dames
NP Dongwana
ID Gladman
JB Hemphill
EM Kruger
RAG Leith
PM Makwana
L Manzini
MA Matooane
NP Mnxasana
RK Morathi
V Naidoo
JK Netshitenzhe
MC Nkuhlu
S Subramoney
MI Wyman (British)
Independent non-executive
director
Independent non-executive
director
Independent non-executive
director
Chief Executive
Independent non-executive
director
Independent non-executive
director
Non-executive director
Non-executive director
Independent non-executive
director
Non-executive director
Independent non-executive
director
Independent non-executive
director
Independent non-executive
director
Independent non-executive
director
Chief Financial Officer and
executive director
Chairman and non-executive
director
Independent non-executive
director
Chief Operating Officer and
executive director
Independent non-executive
director
Lead independent director
21 February 2014
18 May 2017
1 November 2002 (1 March
2010 as non-executive,
1 January 2014 as Independent
non-executive)
1 July 2017
18 May 2017
17 June 2004
30 June 2014
1 June 2017
7 June 2012
25 November 2015
1 August 2016
13 October 2016
17 November 2011
1 June 2017
15 May 2014
1 October 2008
1 September 2009
1 May 2015
5 August 2010
1 January 2015
23 September 2015
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 2017 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 is
included in the 2017 Nedbank Group Integrated Report.
Company Secretary and registered office
As part of the annual board evaluation process, the board of
directors conducts an assessment of the Company Secretary.
The board is satisfied that Thabani Jali is suitably competent,
qualified and experienced and has adequately and effectively
performed the role and duties of a company secretary, and
provided the board with independent guidance and support.
Thabani Jali has direct access to, and ongoing communication
with, the Chairman of the board and the Chairman and the
Company Secretary meet regularly through the year. Thabani
Jali is not a director of the company.
Details of Thabani Jali’s qualifications and experience 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 Limited
PO Box 1144
Johannesburg
2000
SA
Nedbank Limited
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 2017
17
Directors’ Report (continued)
for the year ended 31 December 2017
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.
Subsidiary companies
Details of principal subsidiary companies are reflected in note
F3 to the annual financial statements at nedbankgroup.co.za.
Special resolutions by subsidiaries
■ 31 January 2017 by Depfin Investments Proprietary Limited
regarding the reclassification of 800 000 Class P no par
value preference shares.
■ 15 June 2017 by Depfin Investments Proprietary Limited
regarding the substitution of the rights of the Class P no
par value preference shares.
■ 10 August 2017 by Depfin Investments Proprietary Limited
regarding the reclassification of 700 000 Class Q no par
value preference shares.
■ 17 October 2017 by MHF Properties Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 17 October 2017 by Mortgage Investment Corporation
Proprietary Limited regarding the deletion of the word
’audited’ in the phrase ’audited annual financial
statements’.
■ 17 October 2017 by Pyraned Proprietary Limited regarding
the deletion of the word ’audited’ in the phrase ’audited
annual financial statements’.
■ 9 November 2017 by Morened Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 9 November 2017 by Kingsmead Properties Proprietary
Limited regarding the deletion of the word ’audited’ in the
phrase ’audited annual financial statements’.
■ 9 November 2017 by N H S Properties Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 10 November 2017 by Lighthouse Developments
Proprietary Limited regarding the deletion of the word
’audited’ in the phrase ’audited annual financial
statements’.
■ 22 November 2017 by BoE Developments Proprietary
Limited regarding the deletion of the word ’audited’ in the
phrase ’audited annual financial statements’.
■ 22 November 2017 by BoE Holdings Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 27 November 2017 by Nedcor Bank Nominees (RF)
Proprietary Limited regarding the deletion of the word
’audited’ in the phrase ’audited annual financial
statements’.
■ 27 November 2017 by Bene Inventa Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 8 December 2017 by Depfin Investments Proprietary
Limited regarding the reclassification of 450 000 Class R
no par value preference shares.
■ 11 December 2017 by BoE Private Equity Investments
Proprietary Limited regarding the deletion of the word
’audited’ in the phrase ’audited annual financial
statements’.
■ 14 December 2017 by Telle Investments Proprietary Limited
regarding the deletion of the word ’audited’ in the phrase
’audited annual financial statements’.
■ 18 December 2017 by IBL Asset Finance and Services
Proprietary Limited regarding the deletion of the word
’audited’ in the phrase ’audited annual financial
statements’.
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 1 March 2018.
18
Nedbank Limited – Annual Report 2017
Independent auditors’ report to the shareholders of
Nedbank Limited
Report on the audit of the Nedbank Limited
consolidated financial statements
Opinion
We have audited the consolidated financial statements of
Nedbank Limited (the Group) set out on pages 22 to 157, which
comprise the consolidated statement of financial position at
31 December 2017, and the consolidated statement of
comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cashflows for the
year then ended, and the notes to the 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 at 31 December 2017, 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 Auditors’ 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 (CONSOLIDATED FINANCIAL STATEMENTS)
Refer to Note C2 of the consolidated financial statements for
selected disclosures applicable to this matter.
Loans and advances, which represent 72,2% of total assets, and
the associated impairment provisions are significant in the
context of the consolidated financial statements.
Provisions for loan impairments and other credit risk provisions
represent management’s estimate of credit losses incurred in
loan portfolios at the reporting date. Judgement and knowledge
is needed to select the statistical methods used in developing
and revising the models used to make these estimates. The
estimation of these credit losses is inherently uncertain and is
subject to significant judgement.
Collective impairments are calculated using models which rely on
expert judgement and large historical datasets. Overlays may be
applied to model outputs to cater for additional factors, and the
valuation of these overlays can be highly subjective.
Specific impairment is also calculated for individually significant
loans with larger exposure where there is evidence that an
impairment event has occurred. Both the identification of an
impairment event, and the subsequent valuation of an
impairment allowance, requires judgement.
The Retail and Business Banking (RBB) cluster lends to small and
medium-sized businesses and to individuals. RBB loans
represents 43% of total loans and advances. These loans and
advances are typically lower in value and are assessed
collectively by grouping them into homogenous portfolios for
monitoring and impairment assessment. This process relies on
models to determine incurred credit losses across the portfolios.
The Corporate and Investment Banking (CIB) cluster lends to
corporate, institutional and public sector clients. CIB loans
represent 50,1% 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. For specific
impairments, judgement is required to determine when an
impairment event has occurred and then to estimate the
expected future cashflows related to that loan and advance.
Our audit included identifying relevant controls that address the
impairment risks identified and evaluating the design and
implementation, and where relevant 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 provisions for loan impairments
and other credit risk provisions.
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 used, by:
■ Testing the historical accuracy of models by assessing the
historical projections compared to actual credit losses.
■ Focusing on the most significant model assumptions and we
performed detailed procedures on the completeness and
accuracy of the data used. We compared internal data and
assumptions to those used more widely in the market.
■ Using our internal credit experts we assessed the
appropriateness of the models used for each significant
product type, and independently recalculated the
impairment allowance for selected portfolios using our
challenger models.
■ Challenging the appropriateness of post-model adjustments
made by management by assessing evidence to support the
overlays. We used our internal credit experts to perform an
independent valuation of the overlay amounts applied to
ensure valid.
■ For specific provisions, the appropriateness of provisioning
methodologies and policies was independently assessed for a
sample of loans across the portfolio selected applying risk
criteria. An independent view was formed on the specific
provisions raised based on our review of the detailed loan
and counterparty information.
Nedbank Limited – Annual Report 2017
19
INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF NEDBANK LIMITED (continued)
Key audit matter
How the matter was addressed in the audit
Given the combination of inherent subjectivity and judgement
involved in estimating credit losses and the material nature of the
balance, we considered the impairment of loans and advances to
be a key audit matter in our audit of the consolidated financial
statements.
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, we independently challenged the
valuation of impairment losses that had been incurred by
developing our own expectation of the amount of the allowance.
■ 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.
■ When performing work on the valuation of allowances, we
considered any collateral held by the Bank.
■ Where management have used specialists to perform the
valuations, we assessed their competence, capabilities and
objectivity of these valuations.
VALUATION OF FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE (CONSOLIDATED FINANCIAL STATEMENTS)
Refer to Note I2 of the consolidated financial statements for
selected disclosures applicable to this matter.
At 31 December 2017, financial assets at fair value through profit
or loss (FVTPL) represented 20,4% of total assets and financial
liabilities at FVTPL of 14,2% of total liabilities. Available for sale
(AFS) financial assets represented 2% of total assets. Of the
financial instruments (both assets and liabilities) carried at fair
value or as AFS, 1,5% were classified as level 3 in the fair value
hierarchy as prescribed by IFRS 13 Fair Value Measurement.
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, investment securities and
certain derivative financial instruments.
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.
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 judgement and represents a material balance, this
matter was a considered to be a key audit matter in our audit of
the consolidated financial statements.
As part of our audit, we identified relevant controls over
valuation of financial instruments and evaluated the design and
implementation, and where relevant 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 the 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.
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
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 in relation to the fair value hierarchy to
ensure consistency with the requirements of the relevant
accounting standards and with the methodologies applied by
management.
Where new valuation methodologies have been applied, we
assessed whether, the model valuation methodologies used for
material valuation risks are appropriate, utilising our valuation
experts. We assessed the appropriateness of key assumptions
and inputs observable sources and, where proxies were used, we
assessed the appropriateness of the proxy.
Other information
The directors are responsible for the other information. The other
information comprises the Directors’ Report, the Certification
from the company secretary and the Report from the Group Audit
Committee, as required by the Companies Act of South Africa, as
well as the additional information contained in the audited
consolidated annual financial statements report, which we
obtained prior to the date of this report. The other information
also comprises Nedbank Group Limited’s Integrated 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
Nedbank Limited – Annual Report 2017
20
or our knowledge obtained in the audit, or otherwise appears to
be materially misstated.
expressing an opinion on the effectiveness of the Group’s
internal control.
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.
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 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
■ 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 Group Limited for
44 years and KPMG Inc. has been the auditor of Nedbank
Group Limited for 44 years.
KPMG Inc
Registered Auditor
Per: Sipho Malaba
Partner
1 March 2018
Deloitte & Touche
Registered Auditor
Per: Lito Nunes
Partner
1 March 2018
Nedbank Limited – Annual Report 2017
21
Audited consolidated financial statements
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 income/(losses) 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 shareholders
– Non-controlling interest – ordinary shareholders
Total comprehensive income attributable to:
– Ordinary and preference shareholders
– 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
B8.2.3
2017
Rm
71 311
46 111
25 200
3 030
22 170
19 907
42 077
26 192
858
15 027
(210)
14 817
(96)
14 721
3 563
11 158
493
(29)
(14)
161
375
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)
11 651
9 484
11 160
(2)
11 158
11 653
(2)
11 651
9 896
41
9 937
9 443
41
9 484
22
Nedbank Limited – Annual Report 2017
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
Holders of preference shares
Holders of 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 R22,1bn (2016: R23,8bn).
Included in amounts owed to depositors are deposits from fellow subsidiaries amounting to R16,1bn (2016: R31,4bn).
Notes
2017
Rm
2016
Rm
C6
C4
C7
C3
C1.1
H3
F1
H2
F2
B8.3
G1
H1.1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1.1
D2
8 823
73 472
30 698
48 749
20 241
68 218
18 044
50 687
689 637
691 925
7 332
75
2 250
388
3 277
37
7 976
5 761
18 145
7 341
8 164
440
1 908
287
2 575
266
8 197
5 042
18 139
5 928
903 961
900 061
28
19 182
48 215
67 425
3 561
561
2 600
7
74 154
23 561
28
19 182
42 698
61 908
3 561
2 000
253
67 722
13 469
736 752
750 319
14 047
12 717
191
351
3 423
51 482
53
391
3 328
52 062
829 807
832 339
903 961
900 061
Nedbank Limited – Annual Report 2017
23
Consolidated statement of changes in equity
for the year ended 31 December
Reserves
Reserves
Number of
ordinary
shares
27 555 649
320 830
Ordinary
share
capital
Rm
28
Ordinary
share
premium
Rm
18 532
650
Foreign
currency
translation
reserve¹
Rm
Property
revaluation
reserve²
Rm
Share-
based
payments
reserve³
Rm
352
1 722
(1 035)
(231)
24
–
–
(13)
–
–
(231)
24
(48)
(94)
360
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
(769)
(6)
41 548
61 908
3 561
–
253
67 722
Additional tier 1 capital instruments issued
Preference share dividend
Additional tier 1 capital instruments interest paid
Dividend to shareholders
Distribution of subsidiaries to shareholder
Preference share held by group entities
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
(29)
161
–
–
(14)
11 535
11 653
–
–
561
(29)
161
(109)
82
(94)
Balance at 31 December 2017
27 876 479
28
19 182
92
1 750
(781)
7
(17)
47 164
67 425
3 561
561
2 600
7
74 154
Other
non-
Available-
for-
Other
distributable
sale
distributable
Total equity
attributable
to
equity
holders
Equity
controlling
Non-
Preference
Equity
attributable
interest
share
attributable
to additional
attributable
capital
to
tier 1 capital
to
and
preference
instrument
ordinary
reserves⁴
reserve⁵
reserves⁶
of the parent
premium
shareholders
holders
shareholders
Rm
95
Rm
7
36 469
56 170
Rm
3 561
Rm
Rm
Rm
Rm
20
(10)
1
106
(99)
650
–
(377)
(78)
(4 250)
9 443
(377)
(78)
(4 250)
9 663
9 896
9 896
(231)
(13)
24
(233)
360
(10)
–
–
–
–
(29)
(14)
161
375
–
(94)
(1)
(371)
(218)
(4 665)
(688)
(371)
(218)
(4 665)
(787)
11 160
11 160
(233)
122
(1)
375
24
(1)
(13)
(14)
3
2 000
2 000
600
Rm
223
(11)
41
41
(244)
(2)
(2)
Total
equity
Rm
59 954
650
2 000
(377)
(78)
(4 261)
9 484
9 937
(231)
(13)
24
(233)
360
(10)
–
–
600
(371)
(218)
(4 665)
(1 031)
561
11 651
11 158
(29)
(14)
161
375
–
(94)
(1)
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 Limited to various share schemes to acquire Nedbank Group Limited shares, which is recognised directly in equity. The
reconciliation shown in this note is the cumulative share-based payment charge for all share schemes.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves 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 or 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 2017
Reserves
Reserves
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
Equity
attributable
to
preference
shareholders
Rm
Equity
attributable
to additional
tier 1 capital
instrument
holders
Rm
95
7
36 469
56 170
3 561
(231)
24
–
–
(13)
(13)
Balance at 31 December 2016
27 876 479
28
19 182
121
1 698
(769)
20
(10)
1
106
(99)
Ordinary
Ordinary
Property
Foreign
currency
Share-
based
share
translation
revaluation
payments
premium
reserve¹
reserve²
reserve³
Rm
352
Rm
Rm
1 722
(1 035)
Number of
ordinary
shares
27 555 649
320 830
share
capital
Rm
28
Rm
18 532
650
(231)
(29)
24
(48)
(94)
360
161
(109)
82
(94)
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
operations
Exchange differences on translating foreign
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
Additional tier 1 capital instruments issued
Preference share dividend
Additional tier 1 capital instruments interest paid
Dividend to shareholders
Distribution of subsidiaries to shareholder
Preference share held by group entities
Total comprehensive income for the year
Profit attributable to ordinary and preference
equity holders
operations
Exchange differences on translating foreign
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
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 Limited to various share schemes to acquire Nedbank Group Limited shares, which is recognised directly in equity. The
reconciliation shown in this note is the cumulative share-based payment charge for all share schemes.
⁴ Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves 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 or 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.
(29)
161
–
–
(14)
11 535
11 653
–
–
11 160
11 160
(14)
3
375
24
(1)
(29)
(14)
161
375
–
(94)
(1)
Balance at 31 December 2017
27 876 479
28
19 182
92
1 750
(781)
7
(17)
47 164
67 425
3 561
561
2 600
7
74 154
Nedbank Limited – Annual Report 2017
25
2 000
–
–
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
–
(371)
(218)
(4 665)
(688)
–
(371)
(218)
(4 665)
(787)
–
561
2 000
600
Non-
controlling
interest
attributable
to
ordinary
shareholders
Rm
223
(11)
41
41
Total
equity
Rm
59 954
650
2 000
(377)
(78)
(4 261)
9 484
9 937
(231)
(13)
24
(233)
–
360
(10)
–
253
67 722
(244)
(2)
(2)
600
(371)
(218)
(4 665)
(1 031)
561
11 651
11 158
(29)
(14)
161
375
–
(94)
(1)
Consolidated statement of cashflows
for the year ended 31 December
Cash generated by operations
Cash received from clients
Cash paid to clients, employees and suppliers
Dividends received on investments
Recoveries on loans previously written off
Change in funds for operating activities
Increase in operating assets
Increase in operating liabilities
Net cash from operating activities before taxation
Taxation paid
Cashflows (utilised by)/from operating activities
Cashflows utilised by investing activities
Acquisition of property and equipment, computer software and development costs
and investment property
Disposal of property and equipment, computer software and development costs and
investment property
Disposal of investment banking assets
Notes
M1
M2
M3
M4
M5
M7
2017
Rm
22 183
90 472
2016
Rm
21 707
89 203
(70 207)
(68 662)
710
1 208
(19 139)
(24 144)
5 005
3 044
(3 913)
(869)
(6 197)
9
1 157
(14 185)
(38 057)
23 872
7 522
(4 020)
3 502
(5 265)
(3 571)
(3 776)
4
36
65
11
Acquisition of private-equity associates, associate companies and joint arrangements
(1 459)
(1 403)
Disposal of private-equity associates, associate companies and joint arrangements
Acquisition of investment securities
Disposal of investment securities
Disposal of investments in subsidiary companies net of cash
Cashflows (utilised by)/from financing activities
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
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of year²
Cash and cash equivalents at the end of the year²
¹ Represents amounts less than R1m.
2 Including mandatory reserve deposits with central banks.
M6
D2.1
D2.1
661
(398)
36
(1 506)
(4 346)
600
7 340
(7 939)
(3 758)
(371)
(218)
¹
(11 412)
38 380
208
(818)
448
5 030
650
2 000
13 587
(6 502)
(4 250)
(377)
(78)
772
4 039
34 341
C6
26 968
38 380
26
Nedbank Limited – Annual Report 2017
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 Limited 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 2017 did not have a significant impact on the
basis of preparation. The amendments to standards not yet effective as at 1 January 2017, 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 Limited, together with its subsidiaries, including consolidated structured entities, joint arrangements and
associates, presented as a single entity (’the group’). Separate financial statements for the company are available at
the company’s 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 Limited, 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 (choice per
category).
■ Land and buildings are stated at revalued
amounts, being fair value less subsequent
depreciation and impairment.
■ Revaluation surpluses are recognised 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
G1
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 or loss
under IAS 39.
■ The group has elected to designate certain
fixed-rate financial assets and liabilities at
fair value through profit or 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 2017
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
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December
2017 reporting periods and have not been early adopted by the group. The group’s assessment of the impact of the
new standards can be found in the following notes:
■ IFRS 9: Financial Instruments (refer to note I).
■ IFRS 15: Revenue from Contracts with Customers (refer to note B6).
■ IFRS 16: Leases (refer to note K3).
There are no other standards that are not yet effective and that would be expected to have a material impact on the
group in the current or future reporting periods and on foreseeable future transactions.
28
Nedbank Limited – Annual Report 2017
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 Limited’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 Limited’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 the 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 from R10m up to R700m.
NEDBANK WEALTH
Nedbank Wealth provides insurance, asset management and wealth management solutions to clients ranging from entry-
level to high-net-worth individuals. Insurance provides life and short-term insurance solutions for individuals and
businesses including simple risk, funeral, vehicle, personal-accident, credit life and investments. Asset Management offers
local and international unit trusts, cash management and multimanagement solutions. Wealth Management provides
specialist services to meet the needs of high-net-worth clients locally and internationally, including trust and estate
planning, stockbroking and financial planning for the broader Nedbank client base. Nedbank Wealth has operations in SA,
London, Jersey, Guernsey, the United Arab Emirates and on the Isle of Man.
CENTRE
Centre is an aggregation of business operations that provide various support services to Nedbank Group Limited, 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 2017
29
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
Nedbank Limited
Fellow subsidiaries
Investment Banking
Business Banking
Nedbank Wealth
Centre¹
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Nedbank Corporate and
Nedbank Retail and
26 968
73 472
30 698
48 749
689 637
34 437
–
38 380
68 218
18 044
50 687
691 925
32 807
–
(2 363)
(14 920)
833
1
(151)
(25 266)
903 961
900 061
(41 866)
74 154
23 561
736 752
18 012
51 482
–
67 722
13 469
750 319
16 489
52 062
–
(7 940)
197
(6 703)
(29 202)
129
1 653
462
(13 881)
455
127
4 430
(21 899)
534
(29 772)
(6 047)
189
15 780
(39 694)
3 692
3 765
305 198
289 882
6 078
11 257
6 530
4 665
2 354
16 652
1
29 413
18 412
994
15 604
9
28 577
16 858
487 632
491 480
326 225
304 842
66 832
62 042
27 812
26 254
295 294
272 274
1 798
1 321
3 796
2 518
3 885
2
35 081
23 016
3 387
4
33 461
20 931
4 848
4 259
(88 628)
903 961
900 061
(41 866)
(29 772)
487 632
491 480
326 225
304 842
66 832
62 042
65 138
71 469
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 operations²
Share of (losses)/profits of associate companies and joint
arrangements
Profit/(Loss) before direct taxation²
Direct taxation²
Profit/(Loss) after direct taxation²
Profit attributable to non-controlling interest:
– Ordinary shareholders
– Preference shareholders
– Additional tier 1 capital instruments noteholders
25 200
3 030
22 170
19 907
42 077
26 192
858
15 027
24 518
4 254
20 264
19 361
39 625
25 283
810
13 532
(96)
(20)
14 931
3 622
11 309
(2)
–
–
13 512
3 328
10 184
41
–
–
(950)
(61)
(889)
(3 159)
(4 048)
(1 420)
(103)
(2 525)
(2 525)
(663)
(1 862)
14
(338)
(252)
(895)
(123)
(772)
(3 265)
(4 037)
(1 196)
(85)
(2 756)
(2 756)
(750)
(2 006)
42
(361)
(78)
Headline earnings/(loss)
11 311
10 143
(1 286)
(1 609)
6 315
6 014
5 302
4 960
1 068
1 192
Selected ratios
Average interest-earning banking assets (Rm)³
Return on total assets (%)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 (%)
Revenue (Rm)⁴
Contribution to group economic profit (Rm)³
Number of employees (permanent staff)³
706 613
1,29
17,8
718 901
1,20
17,3
3,57
44,1
76,0
0,47
58,1
24,3
45 107
2 036
28 193
3,41
44,1
76,6
0,67
57,6
24,6
43 879
1 552
29 378
(27 130)
(31 886)
340 065
369 525
306 225
285 393
40 814
50 660
(4 109)
(1 374)
(793)
(4 160)
(1 426)
(637)
Includes all group eliminations.
¹
² These items are presented on a headline earnings basis and therefore exclude the impact of non-trading and capital items.
³ This metric has not been audited by the group’s external auditors.
⁴ Revenue is calculated as net interest income plus non-interest revenue.
Depreciation costs of R1 319m (2016: R1 181m) and amortisation costs of R777m (2016: R784m) 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.
During 2017 the Nedbank Rest of Africa Cluster subsidiaries that had been owned by Nedbank Limited at 31 December
2016 were transferred to Nedbank Group Limited. Comparative information has been restated accordingly.
30
Nedbank Limited – Annual Report 2017
5 025
60 750
29 840
21 312
356 029
14 676
30 437
23 236
338 792
11 690
1 350
82 127
7 216
193
7 023
7 164
14 187
6 044
83
8 060
(96)
7 964
1 665
6 299
15 306
46 625
17 582
27 775
370 199
13 993
28 462
13 239
343 153
25 128
1 378
80 120
7 291
1 095
6 196
7 453
13 649
5 751
96
7 802
(20)
7 782
1 769
6 013
1,31
20,70
2,1
49,8
118,50
0,06
42,3
20,9
14 380
2 039
2 756
1,28
21,10
2,0
50,5
129,60
0,34
39,0
22,7
14 744
1 970
2 729
(16)
(1)
58
80
17 790
3 222
14 568
12 312
26 880
19 136
302
7 442
7 442
2 082
5 360
1,68
19,10
5,8
40,9
64,30
1,06
63,6
28,0
30 102
1 394
20 081
17 347
3 261
14 086
11 724
25 810
18 433
359
7 018
7 018
1 978
5 040
1,68
18,90
6,1
40,3
63,60
1,12
63,4
28,2
29 071
1 230
21 189
1 003
26
977
3 390
4 367
2 880
117
1 370
1 370
302
1 068
46 639
1,62
27,50
2,2
77,2
117,70
0,09
65,6
22,0
4 393
522
2 231
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
23,1
4 384
711
2 232
18 260
10 990
24
27 436
(852)
20 537
(11 257)
65 138
19 960
126
74 288
10 710
48 682
141
(350)
491
200
691
(448)
459
680
680
236
444
280
252
(88)
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)
(199)
(1)
(198)
39
(159)
(409)
332
(82)
(82)
(27)
(55)
281
78
(414)
341
(545)
3 918
(160)
(933)
3 865
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Nedbank Limited
Fellow subsidiaries
Nedbank Corporate and
Investment Banking
Nedbank Retail and
Business Banking
Nedbank Wealth
Centre¹
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
5 025
60 750
29 840
21 312
356 029
14 676
15 306
46 625
17 582
27 775
370 199
13 993
487 632
491 480
30 437
23 236
338 792
11 690
1 350
82 127
28 462
13 239
343 153
25 128
1 378
80 120
3 692
3 765
305 198
6 078
11 257
326 225
289 882
6 530
4 665
304 842
27 812
26 254
295 294
1 798
1 321
272 274
3 796
2 518
2 354
16 652
1
29 413
18 412
994
15 604
9
28 577
16 858
66 832
62 042
3 885
2
35 081
23 016
3 387
4
33 461
20 931
4 848
4 259
18 260
10 990
24
27 436
(852)
20 537
(11 257)
65 138
19 960
126
74 288
10 710
48 682
(88 628)
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)
903 961
900 061
(41 866)
(29 772)
487 632
491 480
326 225
304 842
66 832
62 042
65 138
71 469
7 216
193
7 023
7 164
14 187
6 044
83
8 060
(96)
7 964
1 665
6 299
7 291
1 095
6 196
7 453
13 649
5 751
96
7 802
(20)
7 782
1 769
6 013
17 790
3 222
14 568
12 312
26 880
19 136
302
7 442
7 442
2 082
5 360
17 347
3 261
14 086
11 724
25 810
18 433
359
7 018
7 018
1 978
5 040
(16)
(1)
58
80
1 003
26
977
3 390
4 367
2 880
117
1 370
1 370
302
1 068
974
22
952
3 410
4 362
2 704
108
1 550
1 550
358
1 192
11 311
10 143
(1 286)
(1 609)
6 315
6 014
5 302
4 960
1 068
1 192
340 065
1,31
20,70
369 525
1,28
21,10
306 225
1,68
19,10
285 393
1,68
18,90
2,1
49,8
118,50
0,06
42,3
20,9
14 380
2 039
2 756
2,0
50,5
129,60
0,34
39,0
22,7
14 744
1 970
2 729
5,8
40,9
64,30
1,06
63,6
28,0
30 102
1 394
20 081
6,1
40,3
63,60
1,12
63,4
28,2
29 071
1 230
21 189
46 639
1,62
27,50
2,2
77,2
117,70
0,09
65,6
22,0
4 393
522
2 231
45 209
1,93
35,20
2,2
77,8
126,10
0,08
61,7
23,1
4 384
711
2 232
141
(350)
491
200
691
(448)
459
680
680
236
444
280
252
(88)
(199)
(1)
(198)
39
(159)
(409)
332
(82)
(82)
(27)
(55)
281
78
(414)
40 814
50 660
341
(545)
3 918
(160)
(933)
3 865
Profit/(Loss) from operations²
Share of (losses)/profits of associate companies and joint
arrangements
(96)
(20)
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) before direct taxation²
Direct taxation²
Profit/(Loss) after direct taxation²
Profit attributable to non-controlling interest:
– Additional tier 1 capital instruments noteholders
– Ordinary shareholders
– Preference shareholders
Headline earnings/(loss)
Selected ratios
Return on total assets (%)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 (%)
Revenue (Rm)⁴
Contribution to group economic profit (Rm)³
Number of employees (permanent staff)³
¹
Includes all group eliminations.
903 961
900 061
(41 866)
(2 363)
(14 920)
833
1
(151)
(25 266)
(7 940)
197
(6 703)
(29 202)
129
1 653
(950)
(61)
(889)
(3 159)
(4 048)
(1 420)
(103)
(2 525)
(2 525)
(663)
(1 862)
14
(338)
(252)
462
(13 881)
455
127
4 430
(21 899)
534
(29 772)
(6 047)
189
15 780
(39 694)
(895)
(123)
(772)
(3 265)
(4 037)
(1 196)
(85)
(2 756)
(2 756)
(750)
(2 006)
42
(361)
(78)
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
13 512
3 328
10 184
41
–
–
1,20
17,3
3,41
44,1
76,6
0,67
57,6
24,6
26 968
73 472
30 698
48 749
689 637
34 437
–
74 154
23 561
736 752
18 012
51 482
–
25 200
3 030
22 170
19 907
42 077
26 192
858
15 027
14 931
3 622
11 309
(2)
–
–
1,29
17,8
3,57
44,1
76,0
0,47
58,1
24,3
45 107
2 036
28 193
43 879
1 552
29 378
(4 109)
(1 374)
(793)
(4 160)
(1 426)
(637)
² These items are presented on a headline earnings basis and therefore exclude the impact of non-trading and capital items.
³ This metric has not been audited by the group’s external auditors.
⁴ Revenue is calculated as net interest income plus non-interest revenue.
Depreciation costs of R1 319m (2016: R1 181m) and amortisation costs of R777m (2016: R784m) 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.
During 2017 the Nedbank Rest of Africa Cluster subsidiaries that had been owned by Nedbank Limited at 31 December
2016 were transferred to Nedbank Group Limited. Comparative information has been restated accordingly.
Average interest-earning banking assets (Rm)³
706 613
718 901
(27 130)
(31 886)
Nedbank Limited – Annual Report 2017
31
B2 Dividends
B2.1 Ordinary shares
2017
Final declared for 2016 – paid 2017
Interim declared for 2017
Ordinary dividends paid 2017
Final ordinary dividend declared for 2017
2016
Final declared for 2015 – paid 2016
Interim declared for 2016
Ordinary dividends paid 2016
Final ordinary dividend declared for 2016
¹ Total dividend declared for 2017 = 11 480 cents per share.
² Total dividend declared for 2016 = 8 578 cents per share.
Dividends declared
B2.2 Preference shares
2018
Millions of
shares
Cents per
shares
Rm
28
28
28
28
8 304
8 430¹
16 734
3 050¹
9 073
6 278²
15 351
2 300²
2 315
2 350
4 665
2 500
1 750
4 250
Number of
shares
Cents
per share
Amount
Rm
Nedbank – Final (dividend no 30) declared for 2017 – payable April 2018
358 277 491
43,17350
154,7
2017
Nedbank – Final (dividend no 28) declared for 2016 – paid April 2017
358 277 491
43,98905
Nedbank – Interim (dividend no 29) declared for 2017 – paid September 2017
358 277 491
43,39039
Total of dividends declared
Nedbank (MFC) – participating preference shares1
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
¹ Profit share calculated semi-annually.
157,6
155,5
313,1
58,0
371,1
143,4
153,1
296,5
80,0
376,5
32
Nedbank Limited – Annual Report 2017
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.
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 (2016: 30 000 000) ordinary shares of R1 each
Issued
27 876 479 (2016: 27 876 479) fully paid ordinary shares of R1 each
2017
Rm
2016
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 Limited preference share capital and premium
Authorised
1 000 000 000 (2016: 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 (2016: 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.
2017
Rm
2016
Rm
1
¹
¹
¹
¹
1
¹
¹
¹
¹
3 561
3 561
3 561
3 561
Nedbank Limited – Annual Report 2017
33
B3 Share capital (continued)
B3.2 Preference share capital and premium (continued)
Preference shares are classified as equity instruments by Nedbank Limited (’the company’).
Each preference share confers on the holder the right to capital of the company in the form of a cash dividend prior to
payment of dividends to any other class of shareholder. The rate is limited to 83,33% of the prevailing prime rate on a
deemed value of R10 and is never compounded. The dividends, if declared, accrue half-yearly on 30 June and 31 December
and are payable within 120 days of these dates respectively.
If a preference dividend is not declared, the dividend will not accumulate and will never become payable by the company,
whether in preference to payments to any other class of share or otherwise.
Each preference share confers on the holder the right to a return of capital on the winding-up of the company prior to any
payment to any other class of share, but holders are not entitled to any further participation in the profits, assets or any
surplus assets of the company in such circumstances.
The holders of this class of share are not entitled to be present or vote (even by proxy) at any meeting of the company except
when a declared dividend or part thereof remains in arrears and unpaid after six months from the due date or a resolution is
proposed that directly affects the rights attached to the preference share or the interests of the holder, including resolutions
to wind up the company or in the reduction of its share capital.
At every general meeting where the preference shareholder is entitled to vote, the voting rights are restricted to the holder’s
nominal value in proportion to the total nominal value of all shares issued by the company.
No shares in the capital of the company, in priority to the preference shares, can be created or issued without prior sanction
of the holders of preference shares by way of a resolution passed at a separate class meeting properly constituted in terms
of the provisions set out in the memorandum of incorporation.
B4 Holders of 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
2017
Rm
2016
Rm
Subordinated
Callable notes (rand-
denominated)
NEDT1A
NEDT1B
NED04U
20 May 2016
21 May 2021
25 November 2016
26 November 2021
30 June 2017
1 July 2022
3-month JIBAR
+ 7,00% per annum
3-month JIBAR
+ 6,25% per annum
3-month JIBAR
+ 5,65% per annum
1 500
1 500
500
500
600
2 600
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 Limited 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.
Nedbank Limited – Annual Report 2017
34
B5 Net interest income
Accounting policy
Interest income and expense
Interest income and expense are recognised in profit or loss using the effective-interest-rate method taking into account
the expected timing and amount of cashflows. The effective-interest-rate method is a method of calculating the
amortised cost of a financial asset or financial liability (or group of financial assets or financial liabilities) and of
allocating the interest income or interest expense over the relevant period. Interest income and expense include the
amortisation of any discount or premium or other differences between the initial carrying amount of an interest-bearing
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
2017
Rm
13 334
15 106
11 893
2 305
1 628
21 261
2 959
2 963
139
(143)
2 825
71 311
2016
Rm
12 923
13 888
11 183
2 111
1 566
20 345
3 606
3 603
25
(22)
4 240
69 862
63 791
7 520
71 311
62 873
6 989
69 862
2017
Rm
2016
Rm
27 068
25 767
908
7 520
5 518
5 097
46 111
913
7 458
6 764
4 442
45 344
40 837
41 259
5 274
46 111
4 085
45 344
Nedbank Limited – Annual Report 2017
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.
New standards and interpretations not yet adopted
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 clients,
unless the contracts are in the scope of the standards on leases, insurance contracts and financial instruments. The
standard is effective and will be implemented by the group from 1 January 2018. The group has applied the standard
retrospectively with the cumulative effect of initial application recognised in opening retained earnings at 1 January 2018
and accordingly the group will not restate comparative figures.
The core principle of the standard is that revenue recognised reflects the consideration to which the company expects to
be entitled in exchange for the transfer of promised goods or services to the client. The standard incorporates a five-step
analysis to determine the amount and timing of revenue recognition.
The group performed an assessment to determine the impact of the new standard on the group’s statement of financial
position and performance, which resulted in the measurement of the group’s client loyalty programmes being reviewed.
The group has concluded that the loyalty points awarded to clients are consideration payable in terms of IFRS 15
guidance. IFRS 15 requires revenue to be decreased by the amount expected to be payable to clients, which is recognised
as a liability until payment is affected. The liability for the amount expected to be paid to clients under the loyalty
programme increases by approximately R300m on transition and R216m on an after-tax basis.
36
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Non-interest revenue
Commission and fees 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
¹ Represents amounts less than R1m.
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
2017
Rm
2016
Rm
14 890
14 587
551
950
660
366
1 154
224
3 645
3 909
3 431
371
105
(30)
135
3 426
1 259
2 158
(30)
39
683
119
(430)
700
141
153
46
10
36
386
12
¹
374
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
19 907
19 361
(700)
805
105
(1 364)
1 385
21
Nedbank Limited – Annual Report 2017
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
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
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
BBBEE share-based payments expenses
Other sundries
2017
Rm
2016
Rm
14 562
11 839
2 149
(15)
589
3 855
701
777
398
158
1 821
737
3
734
13 819
11 098
2 234
(61)
548
3 751
599
784
393
196
1 779
754
3
751
2 076
2 086
381
781
914
1 606
2 609
138
116
22
368
815
903
1 618
2 421
125
104
21
2 471
2 296
526
234
12
280
2
219
525
211
5
309
12
297
26 192
25 283
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.
38
Nedbank Limited – Annual Report 2017
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 or OCI.
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 or loss for
that period.
B8.1
Indirect taxation
Value-added taxation¹
Transaction-based 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)/overprovision
Total taxation on income
Taxation on non-trading and capital items
Nedbank Limited – Annual Report 2017
2017
Rm
655
203
858
3 669
(45)
(120)
107
3 611
11
3 622
(59)
3 563
2016
Rm
627
183
810
3 471
10
(293)
157
3 345
(17)
3 328
(42)
3 286
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
2017
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
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
2017
%
2016
%
28,0
(2,7)
(1,0)
24,3
28,0
(2,7)
(0,7)
24,6
Gross
Taxation
Net of
taxation
(29)
(19)
521
232
(231)
(17)
(322)
35
5
(146)
(71)
4
89
(11)
(29)
(14)
375
161
(231)
(13)
(233)
24
B8.2.4 Future taxation relief
The group has estimated taxation losses of R337m (2016: R239m) that can be set off against future taxable income, of which
R117m (2016: R4m) has been applied to the deferred taxation balance.
B8.3 Deferred taxation
The analysis of deferred tax assets and deferred tax liabilities is as follows:
Deferred taxation assets
– Deferred taxation assets to be recovered after more than 12 months
Deferred taxation liabilities
– Deferred taxation liabilities to be recovered after more than 12 months
Net deferred taxation liabilities
The gross movement on the deferred income taxation account is as follows:
– Balance at the beginning of the year
– Statement of comprehensive income charge
– Tax charge/(credit) relating to components of other comprehensive income
– Tax charge/(credit) directly to equity
– Rate change
– Reclassification between taxation types and categories
Balance at the end of the year
2017
Rm
2016
Rm
37
37
(351)
(351)
(314)
(125)
65
(212)
(8)
(34)
(314)
266
266
(391)
(391)
(125)
(696)
285
89
26
(33)
204
(125)
40
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
The movement in deferred taxation assets and liabilities during the year, without taking into consideration the offsetting of balances
with the same tax jurisdiction, is as follows:
Deferred taxation assets
Credit
impairments
Deferred
revenue
Medical
aid
Provisions
Taxation
losses
Balance at the beginning of the year
1 293
273
162
207
26
Total
1 961
Charged/(credited) to the income
statement
Charged/(credited) to other comprehensive
income
Reclassification between taxation types
and categories
163
(3)
21
38
At 31 December 2016
1 456
270
221
65
1
228
501
(24)
222
39
228
2
2 450
Charged/(credited) to the income
statement
Charged/(credited) to other comprehensive
income
Reclassification between taxation types
and categories
(64)
32
402
32
402
(39)
(39)
(34)
34
2 779
(34)
869
At 31 December 2017
1 456
206
214
Deferred taxation
liabilities
Accelerated
asset
allowances
Property
revaluations
Deferred
acquisition
costs
Pension
fund
Capital
investments
Share-
based
payments
Available
for sale
Total
(549)
(591)
(479)
(694)
(223)
(120)
(2)
(2 658)
27
3
(20)
(64)
84
32
50
8
(19)
18
(14)
62
50
26
(33)
At 31 December 2016
(522)
(599)
(499)
(708)
(153)
(23)
(93)
1
(1)
(22)
(2 575)
(41)
(96)
(52)
(147)
2
(3)
(337)
(71)
(107)
5
(173)
At 31 December 2017
(563)
(670)
(595)
(867)
(300)
(45)
(136)
37
38
(8)
(3 093)
Balance at the beginning
of the year
Charged/(credited) to the
income statement
Charged/(credited) to
other comprehensive
income
Charged/(credited)
directly to equity
Change in taxation rate
Reclassification between
taxation types and
categories
Charged/(credited) to
the income statement
Charged/(credited) to
other comprehensive
income
Charged/(credited)
directly to equity
Nedbank Limited – Annual Report 2017
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 disclosed separately on the face
of the statement of comprehensive income, being remeasurements excluded from the calculation of headline earnings 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, 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 38: Impairment of intangible assets
IAS 39: Loss on sale of available-for-sale financial assets
IAS 40: Loss on disposal of investment properties
2017
2016
Gross
210
47
163
Net of
taxation
11 160
151
35
116
Gross
289
44
145
94
6
Net of
taxation
9 896
247
44
103
94
6
Headline earnings
11 311
10 143
42
Nedbank Limited – Annual Report 2017
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 ʼImpairment of loans and advancesʼ, 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 ʼneither past due nor impairedʼ or ʼpast due but not impairedʼ.
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.
2017
Rm
2016
Rm
297 851
138 441
159 410
108 920
140 245
(31 325)
15 719
286 190
135 495
150 695
102 845
131 973
(29 128)
14 818
278 502
299 886
99
15 827
113 318
18 125
95 193
20 426
87 597
20 596
48
66 953
18 494
5 461
17 280
223
15 357
117 959
17 941
100 018
21 913
103 720
26 684
229
76 807
20 050
5 010
15 654
700 992
703 739
(11 355)
(11 814)
689 637
691 925
683 328
676 389
17 664
27 350
700 992
703 739
Nedbank Limited – Annual Report 2017
43
Loans and advances (continued)
C1
C1.2 Sectoral analysis1
Individuals
Financial services, insurance and real estate
Banks
Manufacturing1
Building and property development
Transport, storage and communication
Retailers, catering and accommodation
Wholesale and trade
Mining and quarrying
Agriculture, forestry and fishing1
Government and public sector
Other services
1 The sectoral analysis of loans and advances was reviewed in 2017, which resulted in the reallocation of loans and
advances between the manufacturing and agriculture, forestry and fishing categories. 2016 comparatives have
been restated accordingly.
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
2017
Unearned
finance
charges
Net
Gross
2017
Rm
2016
Rm
248 661
253 000
204 582
185 276
17 664
54 840
8 054
32 413
9 001
26 785
21 921
4 892
11 034
61 145
27 350
57 360
8 263
39 400
8 665
29 993
22 326
3 387
2 969
65 750
700 992
703 739
670 092
657 509
9 146
17 260
3 746
250
498
17 484
21 706
3 856
412
2 772
700 992
703 739
2016
Unearned
finance
charges
Net
No later than one year1
31 944
(7 097)
24 847
29 113
(6 707)
22 406
Later than one year and no later
than five years1
Later than five years
94 126
14 175
(21 047)
(3 181)
73 079
10 994
140 245
(31 325)
108 920
91 200
11 660
131 973
(19 822)
(2 599)
71 378
9 061
(29 128)
102 845
1 During 2017 the group reassessed how certain costs included as part of the effective interest rate are allocated among the ʼno later than one yearʼ and
ʼlater than one year and no later than five yearsʼ buckets. This resulted in R1 498m being transferred from the ʼno later than one yearʼ to the ʼlater than one
year and no later than five yearsʼ bucket. Comparative information for 2016 has been restated accordingly.
44
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2017
2016
2017
2016
2017
2016
2017
2016
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
297 851
286 190
279 791
267 469
9 955
10 133
8 105
8 588
108 920
102 845
98 951
93 955
15 719
14 818
13 029
12 370
6 246
1 233
6 010
1 119
3 723
1 457
99
791
2 880
1 329
223
642
647
1 767
3 399
2 757
Properties in possession
99
223
Overdrafts
Term loans
Overnight loans
Other loans to clients
15 827
15 357
14 321
14 068
113 318
117 959
108 245
113 435
20 426
21 913
20 426
21 913
715
1 674
87 597
103 720
86 963
100 935
111
154
523
2 631
Preference shares and debentures
18 494
20 050
18 494
20 050
Factoring accounts
5 461
5 010
5 208
4 762
194
220
59
28
Deposits placed under reverse
repurchase agreements
17 280
15 654
17 280
15 654
700 992
703 739
662 708
664 611
20 128
20 050
18 156
19 078
Loans and advances defaulted – not
impaired
Loans and advances defaulted –
impaired
815
569
17 341
18 509
18 156
19 078
Nedbank Limited – Annual Report 2017
45
Rm
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
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
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
662 708
279 791
98 951
13 029
14 321
664 611
267 469
93 955
12 370
14 068
662 708
279 791
98 951
13 029
14 321
108 245
113 435
108 245
20 426
86 963
18 494
5 208
17 280
–
21 913
100 935
20 050
4 762
15 654
–
20 128
20 050
9 955
6 246
1 233
715
1 674
111
194
10 133
6 010
1 119
647
1 767
154
220
20 426
86 963
18 494
5 208
17 280
–
4 466
3 215
305
97
548
111
190
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
682 836
684 661
667 174
677 173
13 571
7 469
2 015
49
–
27
–
18 156
19 078
8 105
3 723
1 457
99
791
3 399
523
59
8 588
2 880
1 329
223
642
2 757
2 631
28
700 992
703 739
13 571
5 792
5 332
1 001
54
1 388
4
7 469
2 865
3 183
352
35
1 025
6
3
2 015
876
609
135
109
286
49
47
2
19
11
2
3
2
1
19
27
25
2
46
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
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
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
662 708
279 791
98 951
13 029
14 321
20 426
86 963
18 494
5 208
17 280
–
4 466
3 215
305
97
548
111
190
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
108 245
113 435
108 245
20 128
20 050
662 708
279 791
98 951
13 029
14 321
20 426
86 963
18 494
5 208
17 280
–
9 955
6 246
1 233
715
1 674
111
194
8 105
3 723
1 457
99
791
3 399
523
59
664 611
267 469
93 955
12 370
14 068
21 913
100 935
20 050
4 762
15 654
–
10 133
6 010
1 119
647
1 767
154
220
8 588
2 880
1 329
223
642
2 757
2 631
28
700 992
703 739
13 571
5 792
5 332
1 001
54
1 388
4
7 469
2 865
3 183
352
35
1 025
6
3
2 015
876
609
135
109
286
682 836
684 661
667 174
677 173
13 571
7 469
2 015
18 156
19 078
19
11
2
3
2
1
19
49
47
2
27
25
2
49
–
27
–
Nedbank Limited – Annual Report 2017
47
Rm
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
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
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.
288 379
112 884
314 993
105 873
3 390
1 640
3 600
77 020
17 299
40 822
15 674
616
15 434
57
48
8
1
–
–
3 280
1 834
5 113
82 148
18 467
72 662
14 538
609
10 469
72
62
9
1
–
662 708
279 791
98 951
13 029
14 321
108 245
20 426
86 963
18 494
5 208
17 280
20 128
9 955
6 246
1 233
715
1 674
–
111
194
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
18 156
19 078
8 105
3 723
1 457
99
791
3 399
523
59
8 588
2 880
1 329
223
642
2 757
2 631
28
314 867
158 653
81 214
8 216
10 466
23 711
2 956
22 215
998
4 592
1 846
2 238
1 615
282
107
44
190
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
–
–
35 063
8 252
14 347
3 173
255
7 511
103
1 422
17 750
8 292
5 900
1 099
671
1 483
111
194
–
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
–
2
2
83
64
19
17 819
7 836
3 723
1 457
31
791
3 399
523
59
–
24 397
3
68
22 504
1 822
–
337
269
68
91
9
64
18
18 281
8 120
2 842
1 329
619
2 737
2 606
28
6 799
1 633
546
7
351
415
996
2 851
123
31
44
35
13
797
468
38
223
23
20
25
700 992
703 739
288 436
315 065
317 105
318 002
52 813
44 581
17 904
18 372
24 734
7 719
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 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
Total
NGR 1–12
NGR 13–20
NGR 21–25
NP1–NP3
Unrated¹
314 867
158 653
81 214
8 216
10 466
23 711
2 956
22 215
998
4 592
1 846
2 238
1 615
282
107
44
190
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
18 156
19 078
–
–
35 063
8 252
14 347
3 173
255
7 511
103
1 422
17 750
8 292
5 900
1 099
671
1 483
111
194
–
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
–
2
2
83
64
19
17 819
7 836
3 723
1 457
31
791
3 399
523
59
–
24 397
3
68
22 504
1 822
–
337
269
68
91
9
64
18
18 281
8 120
2 842
1 329
619
2 737
2 606
28
6 799
1 633
546
7
351
415
996
2 851
123
31
44
35
13
797
468
38
223
23
20
25
700 992
703 739
288 436
315 065
317 105
318 002
52 813
44 581
17 904
18 372
24 734
7 719
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
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
288 379
112 884
314 993
105 873
3 390
1 640
3 600
77 020
17 299
40 822
15 674
616
15 434
57
48
8
1
–
–
3 280
1 834
5 113
82 148
18 467
72 662
14 538
609
10 469
72
62
9
1
–
662 708
279 791
98 951
13 029
14 321
108 245
20 426
86 963
18 494
5 208
17 280
20 128
9 955
6 246
1 233
715
1 674
–
111
194
8 105
3 723
1 457
99
791
3 399
523
59
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
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 2017
49
C2
Impairment of loans and advances
Credit risk
Credit risk arises from lending and other financing activities that constitute the group’s core business and is managed across
the group in terms of its board-approved Group Credit Risk Monitoring Framework (GCRMF), which covers the
macrostructures for credit risk management and incorporates selected excerpts from the group credit policy, credit approval
mandates, credit risk monitoring and governance structures. It is a key component of the group’s ERMF, Capital
Management and RAF, and it is reviewed on a quarterly basis.
The GCRMF includes the two AIRB Approach technical forums (ie wholesale and retail) and the ad hoc Group Credit Ratings
Committee, which reports into the Group Credit Committee (GCC). Also included is the Large-exposure Approval
Committee (LEAC), whose function is the approval of credit applications in excess of the large-exposure threshold, imposed
by the Banks Act, 94 of 1990.
The GCC also acts as the designated committee appointed by the board to monitor, challenge and ultimately approve all
material aspects of the group’s AIRB rating and risk estimation systems and processes. The current membership includes
seven non-executive directors and three executive directors. The board and the GCC are required by the banking regulations
to have a general understanding of the AIRB system and the related reports. The GCC also needs to ensure the
independence of Group Credit Risk Monitoring (GCRM), which includes the Credit Model Validation Unit (CMVU) and Model
Risk Management (MRM), from the business units originating the credit in the bank.
GCRM monitors the business units’ credit portfolios, risk procedures, policies and credit standards, maintains the Group
Credit Risk Framework and validates AIRB credit models. GCRM reports to executive management, cluster credit
committees (CCCs) and ultimately the board’s GCC on a regular basis.
Additionally, GCRM ensures consistency in the rating processes, and has ultimate responsibility for independent credit model
validation through the CMVU, the group’s independent risk control unit, as per the banking regulations. GCRM and Group
Credit Portfolio Management (GCPM) champion the Basel III AIRB methodology across the group.
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 correlates with defaults on the portfolio. These
include early arrears and other indicators of potential default, such as changes in macroeconomic conditions and
legislation affecting credit recovery. These annual loss ratios are applied to loan balances in the portfolio and scaled to
the estimated-loss emergence period.
Within the Nedbank Retail and Business Banking and Nedbank Wealth portfolios, which comprise large numbers of
small homogeneous assets with similar risk characteristics where credit-scoring techniques are generally used,
statistical techniques are used to calculate impairment allowances on the portfolio, based on historical recovery rates
and assumed emergence periods. These statistical analyses use, as primary inputs, the extent to which accounts in the
portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios.
There are many such models in use, each tailored to a product, line of business or client category.
Judgement and knowledge are needed in selecting the statistical methods to be used when the models are developed
or revised. Overlays may be applied to model outputs to cater for additional factors and the valuation of these overlays
can be subjective. The impairment allowance reflected in the financial statements for these portfolios is considered to
be reasonable and supportable.
For individually significant loans with 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.
C2.1
Impairment of loans and advances
Balance at beginning of year
Impairments charge
Statement of comprehensive income charge net of
recoveries
Recoveries
Amounts written off against the impairment/Other
transfers
Total
impairments
Specific
impairment
Portfolio
impairment
2017
Rm
2016
Rm
2017
Rm
2016
Rm
2017
Rm
2016
Rm
11 814
11 059
4 238
5 411
7 137
4 122
3 030
1 208
4 254
1 157
2 914
1 208
6 415
5 372
4 215
1 157
4 677
4 644
116
116
39
39
(4 697)
(4 656)
(4 654)
(4 650)
(43)
(6)
Impairment of loans and advances
11 355
11 814
6 605
7 137
4 750
4 677
50
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C2.2 Impairments of loans and advances by
classification
Total impairment – 2017
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
1 987
966
33
1 308
555
4 599
2 313
52
1
71
(64)
(33)
1 002
253
1 243
1 564
160
42
(371)
(94)
24
(931)
(159)
(1 741)
(1 428)
3
Total
Rm
1 687
808
24
1 379
649
4 101
2 449
212
46
Impairment of loans and advances
11 814
4 238
(4 697)
11 355
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
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
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
Specific impairment – 2017
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 – 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
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
246
(47)
(33)
1 002
239
1 211
1 504
(380)
(82)
24
(931)
(160)
(1 689)
(1 436)
4 122
(4 654)
364
92
(40)
990
214
2 444
1 295
13
(374)
(113)
51
(854)
(88)
(1 996)
(1 276)
Specific impairment of loans and advances
6 415
5 372
(4 650)
1 226
314
24
1 252
526
2 047
1 203
13
6 605
1 360
443
33
1 181
447
2 525
1 135
13
7 137
Nedbank Limited – Annual Report 2017
51
Balance
at the
beginning
of the year
Rm
Impairment
charge/
(release)
Rm
Amounts
written off
against the
impairment/
Other
transfers
Rm
C2
Impairment of loans and advances
(continued)
C2.2 Impairments of loans and advances by
classification (continued)
Portfolio impairment – 2017
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 – 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
627
523
127
108
2 074
1 178
39
1
4 677
755
493
133
157
1 982
1 123
1
4 644
Total
Rm
461
494
127
123
2 054
1 246
199
46
4 750
627
523
127
108
2 074
1 178
39
1
(175)
(17)
14
32
60
160
42
116
(122)
32
(6)
1
38
67
29
9
(12)
1
(52)
8
3
(43)
(6)
(2)
(50)
54
(12)
10
39
(6)
4 677
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 of America
Other
Total impairment
Specific impairment
Portfolio impairment
2017
Rm
2016
Rm
2017
Rm
2016
Rm
2017
Rm
2016
Rm
7 695
7 724
5 210
5 191
2 485
2 533
1 038
598
124
629
207
131
216
101
30
586
1 572
439
109
570
83
149
380
70
13
705
266
213
46
38
178
43
102
66
13
430
403
95
57
392
61
65
306
36
2
529
772
385
78
591
29
88
114
35
17
156
11 355
11 814
6 605
7 137
4 750
11 053
10 936
186
100
3
7
6
305
214
343
4
12
6 512
93
6 441
172
180
340
4
4 541
93
100
3
7
6
11 355
11 814
6 605
7 137
4 750
1 169
344
52
178
22
84
74
34
11
176
4 677
4 495
133
34
3
12
4 677
52
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
C2.5 Interest on specifically impaired loans and advances
2017
Rm
2016
Rm
1 301
1 284
Interest on specifically impaired loans and advances is determined for the period for which the loans and advances 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
2017
Rm
2016
Rm
32 502
16 247
48 749
37 904
12 783
50 687
Financial services, insurance and real estate
16 533
10 441
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
1 891
5 721
446
23 748
410
48 749
2 102
4 406
1 350
30 979
1 409
50 687
2017
Rm
2016
Rm
12 859
60 613
73 472
11 570
60 434
1 468
73 472
11 183
57 035
68 218
11 150
56 621
447
68 218
Nedbank Limited – Annual Report 2017
53
Investment
grade
Subinvestment
grade
Not
rated
Total
2017
Rm
2016
Rm
2017
Rm
2016
Rm
2017
Rm
2016
Rm
2017
Rm
2016
Rm
C5 Credit analysis of other
short-term securities,
and government and
other securities
Credit ratings
Other short-term securities
72 674
67 263
798
Negotiable certificates of deposit
12 859
11 133
Treasury bills and other
59 815
56 130
798
854
50
804
–
101
73 472
68 218
12 859
11 183
60 613
57 035
48 749
50 687
101
664
Government and other securities
40 083
47 570
7 863
2 453
803
Government and government-
guaranteed securities
25 172
37 256
7 330
648
Other dated securities
14 911
10 314
533
1 805
112 757
114 833
8 661
3 307
803
803
32 502
37 904
664
16 247
12 783
765
122 221
118 905
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 credit-rating scales of external credit-rating agencies. According to the NGR scale,
investment grade can be equated to a Standard & Poor’s and Fitch rating of at least BB+ and a Moody’s rating of at least
Ba1. All government and other short-term securities are current and not impaired. Investment grade includes credit ratings
from NGR01 to NGR12 and subinvestment grade includes credit ratings from NGR13 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.
2017
Rm
2016
Rm
7 162
1 661
¹
8 823
18 145
7 344
12 897
¹
20 241
18 139
26 968
38 380
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 2017
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, for so long as the hedging relationship
is effective. Any hedge ineffectiveness is recognised in profit or 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 2017
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
2017
Rm
2016
Rm
30 698
(23 561)
7 137
18 044
(13 469)
4 575
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.
Notional
principal
Rm
2017
Positive
value
Rm
Negative
value
Rm
Notional
principal
Rm
2016
Positive
value
Rm
Negative
value
Rm
3 270
275
275
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
3 270
36 977
16 102
16 102
4 773
30
10
10
–
10
345 313
209 472
9
86 481
41 629
7 722
18 856
16 102
2 754
15
10
5
199 368
114 463
3
43 273
41 629
18 121
16 102
2 019
15
10
5
145 945
95 009
6
43 208
7 722
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
Interest rate derivatives
4 287 739
2 161 724
2 126 015
1 445 315
Interest rate swaps
2 121 763
1 052 967
1 068 796
Forward rate agreements
2 150 254
1 097 340
1 052 914
Futures
Caps
Floors
Credit default swaps
199
2 212
2 300
11 011
199
506
2 300
8 412
1 706
789 543
632 233
558
4 375
750
2 599
17 856
11 464
6 392
Total notional principal
4 673 329
2 379 963
2 293 366
1 775 625
956 887
818 738
¹
Includes contracts for difference with positive notionals of R1 199m (2016: R81m) and negative notionals of R463m (2016: R1 029m). The equity forward
agreement has positive notionals of R1 556m (2016: R1 801m) and negative notionals of R1 556m (2016: R1 801m).
56
Nedbank Limited – Annual Report 2017
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
28 604
6 994
661 193
366 754
283 627
558
3 862
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.
2017
Carrying
amount of
assets
Rm
Net carrying
amount
Rm
Carrying
amount of
liabilities
Rm
Net carrying
amount
Rm
2016
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
(138)
–
1 323
(1 021)
1 021
–
(133)
(243)
264
(154)
–
3 510
2 014
(84)
1 266
884
(570)
3 898
3 437
334
1
(8)
13
121
1 021
302
332
264
68
14 875
8 867
33
5 091
884
14 168
13 151
843
1
4
13
156
138
1 323
1 021
302
465
243
222
11 365
6 853
117
3 825
570
10 270
9 714
509
12
35
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
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
7 137
30 698
23 561
4 575
18 044
13 469
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 R61m (2016: R90m).
Nedbank Limited – Annual Report 2017
57
Rm
C7 Derivative financial
instruments (continued)
C7.4 Analysis of derivative
financial instruments
Derivative assets
2017
Maturity analysis
Under one year
One to five years
Over five years
2016
Maturity analysis
Under one year
One to five years
Over five years
Derivative liabilities
2017
Maturity analysis
Under one year
One to five years
Over five years
2016
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
814
509
309
23
–
1 323
332
1
4
5
138
138
173
272
10
225
445
235
814
509
449
16
1 323
465
173
272
1
331
10 051
2 609
2 215
14 875
6 155
1 378
1 236
8 769
8 340
1 758
1 267
11 365
4 106
1 401
1 009
6 516
1 492
4 115
8 561
12 666
7 256
10 776
14 168
30 698
952
2 214
5 424
7 290
4 090
6 664
8 590
18 044
1 103
3 207
5 960
10 270
640
1 673
3 863
6 176
10 706
5 490
7 365
23 561
4 920
3 677
4 872
13 469
Notional principal of derivatives
–
445
332
2017
Maturity analysis
Under one year
One to five years
Over five years
2016
Maturity analysis
Under one year
One to five years
Over five years
75
3 195
3 270
75
200
275
28 632
6 683
1 662
36 977
3 107
4 911
1 110
9 128
22
8
273 102
2 815 165
3 116 921
42 960
1 056 382
1 106 108
29 251
416 192
450 300
30
345 313
4 287 739
4 673 329
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
The maturity analysis in this note is prepared based on contractual maturities.
58
Nedbank Limited – Annual Report 2017
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 or loss.
The group recognised the following gains and losses on hedging instruments and hedged items:
Profit on hedged items (assets) (note B5.1)
Loss on hedging instruments (assets) (note B5.1)
2017
Rm
139
(143)
(4)
2016
Rm
25
(22)
3
Nedbank Limited – Annual Report 2017
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 R28 538m (2016: R19 162m) as collateral for deposits received under repurchase agreements. These
amounts represent assets that have been transferred, but which do not qualify for derecognition under IAS 39. The
associated liabilities amounted to R24 615m (2016: R19 127m).
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
2017
Rm
2016
Rm
72 571
9 695
71 403
10 036
533 992
529 166
279 251
286 647
54 955
66 628
49 070
66 946
133 158
126 503
21 295
74 584
24 615
34 107
86 480
19 127
736 752
750 319
689 912
708 627
46 840
41 692
736 752
750 319
46 840
50 242
209 537
430 133
41 692
62 343
188 621
457 663
736 752
750 319
710 048
731 478
3 927
8 573
6 535
7 669
8 329
9 458
1 029
25
736 752
750 319
60
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Instrument type
Maturity dates
Interest rates
2017
Rm
2016
Rm
D2 Long-term debt
instruments
Subordinated debt¹
Callable notes (rand-denominated
– floating)
6 July 2022 to
16 September 2020
Callable notes (rand-denominated
– fixed)
8 April 2024 to
1 July 2025
JIBAR plus 0,47% to 3,50%
7 019
9 065
10,49% to 11,29%
891
891
Callable notes (US dollar-
denominated)
Basel III subordinated debt²
3 March 2022
Three-month USD LIBOR
1 378
Callable notes (rand-denominated
– floating)
15 March 2022 to
22 December 2026
Securitised liabilities³
Callable notes (rand-denominated
– floating)
25 May 2018 to
25 February 2042
Senior unsecured debt⁴
Senior unsecured notes – fixed
Senior unsecured notes – floating
9 September 2019 to
19 November 2027
21 February 2017 to
31 July 2026
JIBAR plus 3,75% to 4,00%
4 520
2 000
JIBAR plus 0,58% to 3,00%
2 672
3 003
8,79% to 11,39%
18 638
17 967
JIBAR plus 0,85% to 2,25%
17 716
26
17 736
22
51 482
52 062
Unsecured debentures
30 November 2029
Zero coupon
Total long-term debt instruments
in issue
¹
²
³
4
During 2017 two subordinated debt instruments were repaid and two subordinated debt instruments were issued. A sum of R100m was issued at a fixed
interest rate of 10,82%, which is repayable on 31 July 2029. In addition, a sum of R100m was issued at a variable interest rate of JIBAR plus 2,45%, which is
repayable on 2 August 2027.
During 2017 two Basel III subordinated debt instruments were issued. A sum of R2,5bn was issued with variable rates ranging between JIBAR plus 3,75%
and JIBAR plus 3,80%. These instruments are redeemable by 26 May 2022.
During 2017 seven securitised liabilities were repaid and seven securitised liabilities were issued. A sum of R1 340m was issued at floating interest rates
ranging between JIBAR plus 1,05% and JIBAR plus 2,70%. These instruments are repayable by 20 February 2022.
During 2017 five senior unsecured debt instruments were repaid and four senior unsecured debt instruments were issued. A sum of R618m was issued with
a fixed interest rate 9,60%, repayable on 20 February 2024. A sum of R2,9bn was issued with variable interest rates ranging between JIBAR plus 1,29% and
JIBAR plus 1,50%, repayable by 26 February 2024.
D2.1 Movement in carrying amount
Balance at the beginning of the year
Changes arising from cash movements
Issue of long-term debt instruments
Redemption of long-term debt instruments
Interest paid
Changes arising from non-cash movements
Accrued interest and premium discount
Fair-value adjustments
2017
Rm
2016
Rm
52 062
(5 638)
7 340
(7 939)
(5 039)
5 058
5 025
33
44 977
2 650
13 587
(6 502)
(4 435)
4 435
4 409
26
Balance at the end of the year
51 482
52 062
Nedbank Limited – Annual Report 2017
61
Rm
D3 Contractual maturity analysis for financial liabilities
2017
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
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
Statement
of financial
position
amount
< 3 months
51 482
1 136
736 752
542 071
72 571
9 695
72 573
9 696
533 992
400 549
21 295
74 584
24 615
23 561
18 012
17 525
17 094
24 634
5 102
829 807
548 309
81 082
77 117
110 502
38 184
18 012
873 206
26 710
2 837
101 336
–
130 883
52 062
750 319
71 403
10 036
3 363
546 765
71 405
10 036
529 166
405 528
34 107
86 480
19 127
13 469
16 489
22 352
18 301
19 143
2 229
832 339
552 357
77 868
76 384
112 447
39 734
22 177
3 360
101 566
127 103
–
–
–
–
–
–
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
maturity
Total
Non-
determinable
2 360
76 387
5 776
68 077
39 253
65 760
22 919
7 893
71 444
–
760 188
59 159
1 427
15 801
33 762
2 344
31 971
18 235
47 525
7 893
2 335
3 264
5 489
7 372
–
–
–
–
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
72 573
9 696
548 888
21 296
83 101
24 634
23 562
18 012
26 710
2 837
101 336
130 883
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
18 012
–
–
16 488
16 488
Provisions and other liabilities are included in this table 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 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
D3 Contractual maturity analysis for financial liabilities
Rm
2017
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
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
Statement
of financial
position
amount
< 3 months
51 482
1 136
736 752
542 071
533 992
400 549
72 571
9 695
21 295
74 584
24 615
23 561
18 012
72 573
9 696
17 525
17 094
24 634
5 102
26 710
2 837
101 336
3 363
546 765
71 405
10 036
22 352
18 301
19 143
2 229
529 166
405 528
52 062
750 319
71 403
10 036
34 107
86 480
19 127
13 469
16 489
22 177
3 360
101 566
127 103
–
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Non-
determinable
maturity
Total
2 360
76 387
5 776
68 077
39 253
65 760
22 919
7 893
71 444
–
760 188
59 159
1 427
15 801
33 762
2 344
31 971
47 525
7 893
18 235
2 335
3 264
5 489
7 372
72 573
9 696
548 888
21 296
83 101
24 634
23 562
18 012
18 012
829 807
548 309
81 082
77 117
110 502
38 184
18 012
873 206
–
130 883
–
–
–
–
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
Provisions and other liabilities are included in this table 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.
–
–
–
–
–
26 710
2 837
101 336
130 883
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
Nedbank Limited – Annual Report 2017
63
SECTION E: ASSET MANAGEMENT
E1 Managed funds
Accounting policy
Nedbank Group Limited, through a number of subsidiaries, operates unit trusts, holds and invests funds on behalf of
clients and acts as a trustee in a number of fiduciary capacities. In addition, companies in the group operate securities
and custodial services on behalf of clients. Commissions and fees earned in respect of trust and management activities
performed are included in the Nedbank Group Limited consolidated statement of comprehensive income as non-interest
revenue. Nedbank Limited does not have any funds under management.
64
Nedbank Limited – Annual Report 2017
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 Limited
Private-equity portfolio
Other
Total listed and unlisted investments
2017
Rm
15
2 235
143
965
1 127
2 250
2016
Rm
19
1 889
130
713
1 046
1 908
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 2017
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
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 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F2.1 Movement in carrying amount
Carrying amount at beginning of year
Share of associate companies’ and joint arrangements’ losses after taxation for
the current year
Net movement of associate companies and joint arrangements at cost¹
Fair-value movements
Carrying amount at end of year
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.
2017
Rm
2016
Rm
2 575
1 400
(96)
792
6
(20)
921
274
3 277
2 575
2 662
(77)
692
3 277
1 870
19
686
2 575
Nedbank Limited – Annual Report 2017
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
Campuskey Proprietary Limited
Nature of activities
Property development
Masingita Property Investment Holdings Proprietary Limited
Property development
Quintado 126 Proprietary Limited
Other individually immaterial associates1
Private-equity associates (manufacturing, industrial,
leisure and other)
Private-equity associates (property investment associates)
Property development
Other
Individually immaterial joint arrangements1
Various
Various
2017
%
20
35
25
2016
%
20
35
25
Measure-
ment
Acquisition
method
date
Year-end
Fair value
Fair value
Fair value
Dec 15
Aug 05
Dec 13
Feb
Feb
Jun
Fair value
Fair value
Equity-
accounted
All investments in associate companies and joint arrangements are unlisted.
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 Represents various investments that are not individually material.
Group
Net indebtedness of loans
2017
Rm
140
289
109
643
1 592
224
280
3 277
2016
Rm
108
279
93
601
1 147
225
122
2 575
2017
Rm
64
136
367
1 211
2016
Rm
13
98
117
191
909
2017
Rm
2016
Rm
165
23
23
133
288
2 066
127
1 455
188
156
68
Nedbank Limited – Annual Report 2017
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
Campuskey Proprietary Limited
Masingita Property Investment Holdings Proprietary Limited
Property development
Nature of activities
Property development
Property development
Quintado 126 Proprietary Limited
Other individually immaterial associates1
Private-equity associates (manufacturing, industrial,
leisure and other)
Private-equity associates (property investment associates)
Other
Individually immaterial joint arrangements1
Various
Various
Percentage holding
2017
%
20
35
25
2016
%
20
35
25
All investments in associate companies and joint arrangements are unlisted.
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 Represents various investments that are not individually material.
Acquisition
date
Year-end
Dec 15
Aug 05
Dec 13
Feb
Feb
Jun
Measure-
ment
method
Fair value
Fair value
Fair value
Fair value
Fair value
Equity-
accounted
Carrying amount
Net indebtedness of loans
to/(from) associates
Dividends received
Group
2017
Rm
140
289
109
643
1 592
224
280
3 277
2016
Rm
108
279
93
601
1 147
225
122
2 575
2017
Rm
64
136
367
1 211
2016
Rm
13
98
117
191
909
2017
Rm
2016
Rm
165
23
23
133
288
2 066
127
1 455
188
156
Nedbank Limited – Annual Report 2017
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; and
■ assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5: Non-Current Assets Held for
Sale and discontinued operations, which are measured in accordance with that standard.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the
combination occurs, the group reports provisional amounts for the items for which the accounting is incomplete.
Where provisional amounts were reported, these are adjusted during the measurement period (see below). Additional
assets or liabilities are recognised to reflect any new information obtained about the facts and circumstances that
existed at the date of acquisition, which, if known, would have affected the amounts recognised on that date.
70
Nedbank Limited – Annual Report 2017
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 Limited’s presentation currency is SA rand. The assets and liabilities, including goodwill and fair-value
adjustments, of group entities (including equity-accounted associates) that have functional currencies other than that
of the company (SA rand) are translated at the closing exchange rate. Income and expenses are translated using the
average exchange rate for the period. The differences that arise on translation of these entities are recognised in other
comprehensive income 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 2017
71
Investments in subsidiary companies and related disclosure (continued)
F3
F3.1 Analysis of investments in subsidiary companies
Non-banking companies²
Depfin Investments Proprietary Limited
Nedcor Trade Services Limited (Mauritius)
Nedcor Investments Limited
Group
Issued capital
Effective holding
2017
Rm
¹
4
28
2016
Rm
¹
4
28
2017
Rm
100
100
100
2016
Rm
100
100
100
¹
²
Represents amounts less than R1m.
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
2017
Rm
2016
Rm
11 348
10 160
(37)
11 311
(17)
10 143
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 Limited will ensure that, except in the case of political risk, and unless specifically excluded by public notice in a
country where a subsidiary is domiciled, its banking subsidiaries, and its principal non-banking subsidiaries, are able to meet
their contractual liabilities.
F3.2 Material non-controlling interests
Nedbank’s shareholding in Nedbank (Swaziland) Limited was distributed as a dividend in specie to Nedbank Group Limited
on 1 June 2017. The value of the dividend in specie was equal to the carrying amount of the investments distributed of
R451m at 1 June 2017. This has been recognised in the statement of changes in equity in the distribution of subsidiaries to
shareholder line. As a result of this distribution Nedbank (Swaziland) Limited’s financial position, comprehensive income,
cashflows and other financial information are disclosed in the Nedbank Group Limited consolidated financial statements for
the year ended 31 December 2017.
72
Nedbank Limited – Annual Report 2017
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)
Greenhouse Funding (RF) Limited
Greenhouse Funding III (RF) Limited
Precinct Funding 1 (RF) Limited
Precinct Funding 2 (RF) Limited
The following judgements have been applied in determining that the group has control over the following structured entities:
SECURITISATION
The group originated and sponsors certain securitisation vehicles and acts in various capacities with regard to these
structures. The group controls these entities and has consolidated these structures since its inception. These securitisation
structures include the following:
Securitisation vehicles consist of the residential mortgage-backed securitisation programmes Greenhouse Funding (RF)
Limited and Greenhouse Funding III (RF) Limited and the commercial-mortgage-backed securitisation (CMBS) programmes
Precinct Funding 1 (RF) Limited and Precinct Funding 2 (RF) Limited. The activities of these vehicles are predetermined and
restricted in terms of the programme documentation established at its inception. The group does, however, exercise some
discretion in its decisionmaking, which includes the selection and transfer of assets and the management of defaulted
assets. Through the provision of administration services, the interest rate hedge and credit enhancement Nedbank Limited
has rights to the residual return of the vehicle. The group has concluded that it controls these entities.
The group has set up securitisation vehicles that acquire the rights, title, interest and related security of commercial and
residential mortgage bonds from Nedbank Limited. 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 2017
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).
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 Limited 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:
■ Greenhouse Funding (RF) Limited (’Greenhouse’), a residential-mortgage-backed securitisation programme.
■ Greenhouse Funding III (RF) Limited (’Greenhouse III’), a residential-mortgage-backed securitisation programme.
■ Precinct Funding 1 (RF) Limited (’Precinct Funding 1’), a CMBS programme.
■ Precinct Funding 2 (RF) Limited (’Precinct Funding 2’), a CMBS programme.
Synthesis Funding Limited
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. During 2017 all
the remaining assets were sold and the commercial paper was repaid. As at 31 December 2017 Synthesis’ operations had
ceased and the company was dormant.
Greenhouse Funding (RF) Limited (’Greenhouse’)
Greenhouse was a securitisation vehicle through which the rights, title, interest and related security in respect of residential
home loans were acquired from Nedbank Limited under a segregated-series medium-term-note programme.
During December 2007 the first Greenhouse transaction was created and R2bn of home loans from Nedbank Limited 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 Limited. The senior notes, which were 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 had
continued to be recognised as financial assets held by Nedbank Limited.
The maturity of the Greenhouse securitisation transaction was on 25 October 2017. As such all the outstanding notes issued
by Greenhouse have been redeemed.
Greenhouse Funding III (RF) Limited (’Greenhouse III’)
Greenhouse III is a securitisation vehicle through which the rights, title, interest and related security in respect of residential
home loans were acquired from Nedbank Limited under a segregated-series medium-term-note programme.
Greenhouse III is a residential-mortgage-backed securitisation programme implemented during 2014. Greenhouse III
securitised R2bn worth of home loans originated by Nedbank Limited through the issuance of senior notes to the capital
market and subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Greenhouse III
are listed on the JSE and rated by Moody’s. The home loans transferred to Greenhouse III continue to be recognised as
financial assets held by Nedbank Limited.
Greenhouse III makes use of an internal risk management policy, and utilises the Nedbank Group credit risk monitoring
process to govern lending activities to external parties.
Nedbank Limited provided Greenhouse III with an interest-bearing subordinated loan at the commencement of the
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 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 (RF) Limited (’Precinct Funding 1’)
Precinct Funding 1 is a CMBS programme. The originator, seller and servicer of the commercial property mortgage loan
portfolio is Nedbank CIB Property Finance, the market leader in commercial property finance in SA.
The Precinct Funding 1 CMBS Programme was implemented during 2013. Precinct Funding 1 securitised R2,5bn worth of
commercial property loans originated by Nedbank Limited through the issuance of senior notes to the capital market and
subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Precinct Funding 1 are listed
on the JSE and rated by Moody’s. The class A and class B notes were placed with third-party investors and the junior notes
and subordinated loan retained by Nedbank Limited.
74
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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 makes use of an internal risk management policy and utilises the Nedbank Group Limited 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 Limited provided Precinct Funding 1 with an interest-bearing subordinated loan at the commencement of the
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.
Nedbank holds the class C and class D notes of Precinct Funding 1 amounting to R87m. These notes are subordinated to the
higher-ranking notes in terms of the priority of payments.
Precinct Funding 2 (RF) Limited (’Precinct Funding 2’)
Precinct Funding 2 is a CMBS programme. The originator, seller and servicer of the commercial property mortgage loan
portfolio is Nedbank CIB Property Finance, the market leader in commercial property finance in SA.
The Precinct Funding 2 CMBS Programme was implemented during 2017. Precinct Funding 2 securitised R1bn worth of
commercial property mortgage loans originated by Nedbank Limited through the issuance of senior notes to the capital market
and subordinated notes and a subordinated loan provided by Nedbank Limited. The notes issued by Precinct Funding 2 are listed
on the JSE and rated by Moody’s. The class A and class B notes were placed with third-party investors and the junior notes and
subordinated loan retained by Nedbank Limited.
In comparison to Precinct Funding 1 the Precinct Funding 2 Structure allows for more flexibility to substitute loans.
However, loan substitutions are subject to certain portfolio covenants and eligibility criteria.
Precinct Funding 2 makes use of an internal risk management policy and utilises the Nedbank Group Limited 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 Limited provided Precinct Funding 2 with an interest-bearing subordinated loan at the commencement of the
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.
Nedbank holds the class C and class D notes of Precinct Funding 2 amounting to R80m. These notes 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
2017
2016
Carrying
amount of
assets
Associated
liabilities
Carrying
amount of
assets
Associated
liabilities
1 321
2 831
3 176
1 462
(5)
1 321
1 350
(23)
982
(3)
203
469
1 283
671
5 130
2 778
2 671
4 459
This table presents the gross balances within the securitisation schemes and does not reflect any eliminations of
intercompany and cash balances held by the various securitisation vehicles.
¹ The value of any derivative instruments taken out to hedge any financial asset or liability is adjusted against such instrument in this disclosure.
Nedbank Limited – Annual Report 2017
75
F6 Related parties
F6.1 Relationship with parent, ultimate controlling party and investees
The group’s parent company is Nedbank Group Limited, which holds 100% (2016: 100%) of Nedbank Limited’s ordinary
shares. The ultimate controlling party is Old Mutual plc, incorporated in the United Kingdom.
Material subsidiaries of the group are identified in note 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)
2017
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
2016
Directors’ fees
Remuneration – paid by subsidiaries
Short-term employee benefits
Gain on exercise of share instruments
Number of share instruments
2017
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Transferred
Outstanding at the end of the year
2016
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Expired
Outstanding at the end of the year
Key
management
personnel
Directors
Total
20
88
49
39
108
17
78
48
30
95
176
103
73
176
172
109
63
172
20
264
152
112
284
17
250
157
93
267
539 664
1 208 100
1 747 764
160 984
303 964
464 948
(18 131)
(18 131)
(173 215)
(329 173)
(502 388)
(213 846)
(213 846)
527 433
950 914
1 478 347
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
76
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
F6.3 Related-party transactions
Transactions between Nedbank Limited and its subsidiaries, which are related parties, have been eliminated on consolidation
and are not disclosed in this note. Transactions between Nedbank Limited and its other related parties are disclosed below.
All of these transactions were entered into in the normal course of business.
Outstanding balances (Rm)
Parent/Ultimate controlling party
Deposits owing to Old Mutual Life Assurance Company (SA) Limited
Bank accounts owing to Nedbank Group Limited
Bank balances owing to Old Mutual Life Assurance Company (SA) Limited
Accounts payable to Old Mutual plc
Accounts receivable from Old Mutual plc
Due from/(Owing to)
2017
2016
(1 350)
(205)
(6 672)
(1 607)
(501)
(7 993)
(54)
1
Net bonds, derivatives and other financial instruments payable to Old Mutual Life Assurance
Company Proprietary Limited
(1 020)
(1 002)
Fellow subsidiaries
Loan due from other fellow subsidiaries
Loans owing to Nedgroup Securities Proprietary Limited
Loans due from/(owing to) Nedbank Malawi Limited
Loans due/(owing to) from other fellow subsidiaries
Deposits owing to Old Mutual Asset Managers (SA) Proprietary Limited
Bank balances owing to Old Mutual Asset Managers (SA) Proprietary Limited
Deposits due from Nedgroup Securities Proprietary Limited
Deposits owing to Syfrets Securities Limited
Deposits (owing to)/due from other fellow subsidiaries
Bank balances owing to other fellow subsidiaries
Deposits owing to Old Mutual subsidiaries1
Bank balances owing to Old Mutual subsidiaries1
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 owing to entities under the influence of key management personnel
Key management personnel – directors
Key management personnel – other
Share-based payments reserve
Long-term employee benefit plans
Bank balances owing to Nedgroup Medical Aid Fund
Bank balances owing to Nedgroup Pension Fund
Bank balances and deposits owing to other funds
381
4 590
19
1 813
14
(989)
(650)
(3 254)
(8 692)
(2 758)
(2)
(4)
2
2 066
(168)
(39)
20
(16)
(127)
3
(9)
(103)
(41)
(86)
(127)
(2)
(43)
427
7 103
(76)
(13 722)
(55)
(2)
58
(12 654)
1 466
(3 235)
(9 754)
(2 833)
(99)
89
(27)
1 455
(60)
(1)
20
(4)
(103)
3
(8)
(43)
(39)
(103)
(142)
(2)
(64)
(1 619)
(2 390)
¹
Previously disclosed in the Nedbank Group Limited consolidated financial statements only. 2016 comparative information has been restated.
Nedbank Limited – Annual Report 2017
77
F6 Related parties (continued)
F6.3 Related-party transactions (continued)
Transactions (Rm)
Parent/Ultimate controlling party
Interest expense to Old Mutual Life Assurance Company Proprietary Limited
Dividend declared to Nedbank Group Limited
Fellow subsidiaries
Interest income from Old Mutual Asset Managers (SA) Proprietary Limited
Interest income from Old Mutual subsidiaries1
Interest expense to Old Mutual subsidiaries1
Interest income from fellow subsidiaries
Interest income from Syfrets Securities Limited
Interest income from Nedgroup Securities Proprietary Limited
Interest expense to Syfrets Securities Limited
Interest expense to other fellow subsidiaries
Interest expense to Old Mutual Asset Managers (SA) Proprietary Limited
Interest expense to Nedgroup Securities Proprietary Limited
Management fee income from fellow subsidiaries2
Management fee expense to fellow subsidiaries2
Fees received for provision of information technology services
Associates
Interest income from associates
Interest expense to associates
Key management personnel
Interest income from key management personnel
Interest income from entities under the influence of key management personnel
Interest expense to key management personnel
Interest expense to entities under the influence of key management personnel
The share-based payments charge in respect of the entities that are participants in the
Nedbank Eyethu BEE schemes and key management personnel is detailed below:
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)
2017
2018
(547)
(3 050)
(468)
(2 300)
38
59
(1 131)
135
306
4
(1 011)
(435)
(1)
444
(83)
167
2
(14)
2
132
(2)
(82)
1
1
(24)
(27)
(51)
28
57
(866)
122
203
5
(893)
(169)
(2)
(17)
355
(69)
125
(8)
2
111
(2)
(58)
(2)
(2)
(26)
(45)
(71)
¹
²
Previously disclosed in the Nedbank Group Limited consolidated financial statements only. 2016 comparative information has been restated.
Management fee income from fellow subsidiaries includes fees for transactional banking services to Old Mutual to the value of R137m previously not
included in this analysis. 2016 comparative information has been restated accordingly.
78
Nedbank Limited – Annual Report 2017
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) Limited, in respect of its pension plan
obligations. Nedbank Limited has an insurance policy (Symmetry policy) with a fellow
subsidiary, Old Mutual Life Assurance Company (SA) Proprietary Limited, 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)
2017
2016
(1)
(161)
(1)
(204)
765
1 440
618
2 823
(765)
(1 440)
(454)
784
1 342
571
2 697
(784)
(1 342)
(408)
Included in long-term employee benefit liabilities
(2 659)
(2 534)
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 2017
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 2017
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.
Nedbank Limited – Annual Report 2017
81
G1 Property and equipment (continued)
Land
Buildings
Computer equipment
equipment
Vehicles
Total
Furniture and other
Gross carrying amount
Balance at 1 January
Acquisitions
Increases arising from revaluations¹
Transfers to non-current assets held for sale
Disposals
Write-off 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
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
2017
Rm
2016
Rm
2017
Rm
2016
Rm
825
885
6 254
6 237
8
(65)
(7)
761
1
(62)
1
825
–
–
825
761
885
825
317
183
(236)
(150)
(83)
(30)
6 255
356
56
(162)
(150)
(86)
3
6 254
1 521
1 350
381
(25)
(83)
(92)
(25)
1 677
4 733
4 578
368
(7)
(86)
(103)
(1)
1 521
4 887
4 733
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 (principally computer equipment, motor vehicles, fixtures and furniture) is stated at cost less accumulated
depreciation and impairment losses. Land and buildings are recognised at the revalued amount, which is based on external
valuations obtained every three years on a rotation basis for all properties in accordance with the group’s accounting policy.
The valuers are members or associates of the Institute of Valuers (SA) or a local equivalent in the case of foreign subsidiaries.
An annual internal review is also done on those properties not subject to external valuation. The carrying amount of
properties is the fair value as determined by the valuers less subsequent accumulated depreciation and impairment losses.
Adjustments in the valuation of the properties are recorded in the revaluation reserve, which is amortised over the remaining
useful life of the property. In determining the fair value of properties the following factors are considered:
2017
Rm
4 646
652
2016
Rm
3 895
895
2017
Rm
2 388
359
2017
Rm
2016
Rm
2017
Rm
2016
Rm
28
6
27
5
(138)
(139)
(72)
(76)
(1)
(4)
(74)
(5)
5 086
4 646
2 865
701
2 405
599
(48)
3 382
1 781
1 704
(2)
2 865
1 490
1 781
(131)
2 544
1 540
234
(92)
1 623
848
921
(136)
(137)
(59)
(70)
(3)
30
18
3
(1)
(2)
18
10
12
19
3
(4)
18
8
10
(245)
(15)
28
14 676
14 141
14 141
1 334
191
(301)
(361)
(83)
5 944
1 319
(25)
(83)
(288)
(167)
6 700
8 197
7 976
13 296
1 482
57
(224)
(369)
(86)
5 182
1 181
(7)
(86)
(314)
(12)
5 944
8 114
8 197
2016
Rm
2 252
226
(14)
2 388
1 408
211
(9)
1 540
844
848
Type of property
Valuation method
Significant inputs
Parameters
2017
Rm
2016
Rm
2017
Rm
2016
Rm
Commercial property
Residential property
Total land and buildings
Market-comparable
approach and discounted
cashflow
Market comparable
approach and replacement
value
Income capitalisation rates
(2016: 8,0%–13,5%)
756
820
4 568
4 723
8,0%–13,0%
Price per square metre
5
761
5
825
10
4 578
10
4 733
In accordance with IFRS 13: Fair Value Measurement the measurement of the group’s properties are considered to be
recurring. Recurring fair-value measurements are those that IFRS requires or permits to be recognised in the statement of
financial position at the end of each reporting period. Furthermore, the group classifies its properties measured at fair value
into Level 3 of the fair-value hierarchy. Level 3 fair-value measurements are those that include the use of significant
unobservable inputs.
In respect of certain properties there are restrictions of title in terms of regulatory restrictions such as servitudes. This does
not have a material effect on the ability of the group to transfer these properties. No material plant and equipment have
been pledged as security for liabilities.
If land and buildings were carried under the cost and not the revaluation model, the carrying amount would have been
R2 758m (2016: R3 089m).
82
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
28
6
27
5
(138)
(139)
(72)
(76)
(1)
(4)
14 141
1 334
191
(301)
(361)
(83)
13 296
1 482
57
(224)
(369)
(86)
Vehicles
Total
2017
Rm
2016
Rm
2017
Rm
2016
Rm
G1 Property and equipment (continued)
Land
Buildings
Computer equipment
Furniture and other
equipment
2017
Rm
4 646
652
2016
Rm
3 895
895
2017
Rm
2 388
359
2016
Rm
2 252
226
Gross carrying amount
Balance at 1 January
Acquisitions
Increases arising from revaluations¹
Transfers to non-current assets held for sale
Disposals
Write-off 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
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.
2017
Rm
2016
Rm
2017
Rm
2016
Rm
825
885
6 254
6 237
8
(65)
(7)
761
1
(62)
1
825
–
–
825
761
885
825
1 521
1 350
317
183
(236)
(150)
(83)
(30)
6 255
381
(25)
(83)
(92)
(25)
1 677
4 733
4 578
356
56
(162)
(150)
(86)
3
6 254
368
(7)
(86)
(103)
(1)
1 521
4 887
4 733
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 (principally computer equipment, motor vehicles, fixtures and furniture) is stated at cost less accumulated
depreciation and impairment losses. Land and buildings are recognised at the revalued amount, which is based on external
valuations obtained every three years on a rotation basis for all properties in accordance with the group’s accounting policy.
The valuers are members or associates of the Institute of Valuers (SA) or a local equivalent in the case of foreign subsidiaries.
An annual internal review is also done on those properties not subject to external valuation. The carrying amount of
properties is the fair value as determined by the valuers less subsequent accumulated depreciation and impairment losses.
Adjustments in the valuation of the properties are recorded in the revaluation reserve, which is amortised over the remaining
useful life of the property. In determining the fair value of properties the following factors are considered:
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.
R2 758m (2016: R3 089m).
If land and buildings were carried under the cost and not the revaluation model, the carrying amount would have been
(74)
(5)
5 086
4 646
2 865
701
2 405
599
(131)
2 544
1 540
234
(14)
2 388
1 408
211
(136)
(137)
(59)
(70)
(48)
3 382
1 781
1 704
(2)
2 865
1 490
1 781
(92)
1 623
848
921
(9)
1 540
844
848
(3)
30
18
3
(1)
(2)
18
10
12
(245)
(15)
28
14 676
14 141
19
3
(4)
18
8
10
5 944
1 319
(25)
(83)
(288)
(167)
6 700
8 197
7 976
5 182
1 181
(7)
(86)
(314)
(12)
5 944
8 114
8 197
Type of property
Valuation method
Significant inputs
Parameters
2017
Rm
2016
Rm
2017
Rm
2016
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%–13,0%
(2016: 8,0%–13,5%)
756
820
4 568
4 723
Price per square metre
5
761
5
825
10
4 578
10
4 733
Nedbank Limited – Annual Report 2017
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 development costs (not yet commissioned)
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.
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 15 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 2017
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 Limited. 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 Limited’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 2017
85
G2
Intangible assets (continued)
Rm
2017
Cost
Goodwill
Software
Software
development
costs
Balance at the beginning of the year
1 633
9 709
Acquisitions
Development costs commissioned to software
Impairment losses1
Disposals and retirements
Foreign currency translation and other movements
Balance at the end of the year
Accumulated amortisation
Balance at the beginning of the year
Amortisation charge
Disposals and retirements
Foreign currency translation and other movements
Balance at the end of the year
Carrying amount
At the beginning of the year
At the end of the year
2016
Cost
Balance at the beginning of the year
Acquisitions
Development costs commissioned to software
Impairment losses1
Disposals and retirements
Foreign currency translation and other movements
Total
12 919
2 360
–
(167)
(303)
(24)
220
1 259
(109)
(306)
(19)
3
1 577
2 140
(1 259)
(58)
(5)
1 636
10 754
2 395
14 785
224
224
1 409
1 412
1 633
6 762
777
(299)
(23)
7 217
2 947
3 537
8 361
464
1 084
(89)
(105)
(6)
5
(2)
3
1 572
2 392
1 299
1 548
(1 084)
(56)
(130)
6 991
777
(299)
(25)
7 444
5 928
7 341
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
784
(69)
(6)
(130)
224
6 762
5
1 409
1 409
2 308
2 947
1 164
1 572
6 412
784
(199)
(6)
6 991
4 881
5 928
¹
Impaired intangible assets consist of projects mainly within the Nedbank Retail and Business Banking Cluster. The main indicators of the impairment of a
project are the decommissioning of the project and/or the project not reaching full functionality. When one of these indicators is present, the project is
tested for impairment by comparing its recoverable amount with its carrying amount. Where the recoverable amount of a project is lower than its carrying
value, the project is impaired.
86
Nedbank Limited – Annual Report 2017
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
2017
Rm
776
629
7
1 412
2016
Rm
776
629
4
1 409
Goodwill is allocated to individual CGUs based on business activity. Impairment testing is done on a regular basis by
comparing the net carrying value of the CGUs with the estimated VIU. 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-use1
Net estimated recoverable amounts1
2017
8,59
2016
8,96
0,13–0,74
0,21–0,81
6,00
6,00
0,00–4,60
0,00–6,60
3
4
7,85–13,04
9,39–13,84
2017
Rm
2016
Rm
1 412
52 660
51 248
1 409
77 709
76 300
¹
During 2017 the group refined its impairment testing methodology to align with best practice. Had the group applied its refined methodology in 2016
the value-in-use would have been estimated as R52 729m. No impairment loss would have been recognised had the group applied the refined methodology
in 2016.
Nedbank Limited – Annual Report 2017
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 custom.
For defined-benefit schemes, including postretirement medical aid schemes, actuarial valuation of each of the scheme’s
obligations using the projected-unit credit method and the fair valuation of each of the scheme’s assets are performed
annually in accordance with the requirements of IAS 19: Employee Benefits.
The actuarial valuation is dependent on a series of assumptions, the key ones being interest rates, mortality, investment
returns and inflation. Mortality estimates are based on standard industry and national mortality tables, adjusted where
appropriate to reflect the group’s own experience. The returns on fixed-interest investments are set to market yields at
the valuation date (less an allowance for risk) to ensure consistency with the asset valuation. The returns on equities are
based on the long-term outlook for global equities at the calculation date, having regard to current market yields and
dividend growth expectations.
The inflation assumption reflects long-term expectations of both earnings and retail price inflation.
88
Nedbank Limited – Annual Report 2017
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 2017.
Post-employment benefits
DEFINED-BENEFIT PENSION FUNDS
Nedgroup Pension Fund (including the Optiplus policy).
Nedbank UK 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 (Symmetry) annuity policies 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
2017
Postemployment benefits
Other long-term employee benefits – disability fund
2016
Postemployment benefits
Other long-term employee benefits – disability fund
Notes
Assets
Liabilities
H1.1.1
H1.1.1
5 307
454
5 761
4 633
409
5 042
(2 969)
(454)
(3 423)
(2 919)
(409)
(3 328)
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 R454m (2016: R409m). The value of the OMART asset held by the group is R454m (2016: R409m).
Nedbank Limited – Annual Report 2017
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
2017
Present value of defined-benefit obligation
Fair value of plan assets1
Funded status
Unrecognised due to paragraph 64 limit
Net fund asset2
Net fund liability3
2016
Present value of defined-benefit obligation
Fair value of plan assets1
Funded status
Unrecognised due to paragraph 64 limit
Net fund asset2
Net fund liability3
(4 616)
7 780
3 164
(64)
3 100
3 866
(766)
(4 954)
7 485
2 531
(27)
2 504
3 291
(787)
(2 203)
1 441
(762)
(762)
1 441
(6 819)
9 221
2 402
(64)
2 338
5 307
(2 203)
(2 969)
(2 133)
1 343
(790)
(790)
1 342
(2 132)
(7 087)
8 828
1 741
(27)
1 714
4 633
(2 919)
¹
2
3
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 R765m (2016: R784m) and for
medical aid to the value of R1 441m (2016: R1 342m).
The pension and provident fund net asset refers to the sum of pension and provident funds with a net positive fund value of R3 101m (2016: R2 507m)
plus non-qualifying insurance policies taken on the funds of R765m (2016: R784m). The medical aid fund net asset refers to non-qualifying insurance
policies taken on the fund of R1 441m (2016: R1 342m).
The pension and provident fund net liability refers to the sum of pension and provident funds with a net negative fund value of R2m (2016: Rnil) plus the
obligation on non-qualifying insurance policies of R764m (2016: R787). The medical aid fund net liability refers to the sum of medical aid funds with a
negative fund value of R762m (2016: R790m) plus the obligation on non-qualifying insurance policies of R1 441m (2016: R1 342m).
H1.1.2 Postemployment benefits
Present value
of obligation
Fair value of
plan asset
Surplus/
(Deficit)
Unrecognised
due to
paragraph
64 limit
Net asset/
(liability)
Rm
Analysis of postemployment benefit assets and
liabilities
2017
Pension funds
Nedgroup Fund
Nedbank UK Fund
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
Total
2016
Pension funds
Nedgroup Fund
Nedbank UK Fund
Other funds
Medical aid funds
Nedgroup scheme for Nedbank employees
Nedgroup scheme for BoE employees
4 616
4 248
368
2 203
2 068
135
6 819
4 954
4 370
381
203
2 133
1 996
137
7 780
7 350
430
1 441
1 441
3 164
3 102
62
(762)
(627)
(135)
(64)
(64)
–
3 100
3 102
(2)
(762)
(627)
(135)
9 221
2 402
(64)
2 338
7 485
6 876
404
205
1 343
1 343
2 531
2 506
23
2
(790)
(653)
(137)
1 741
(27)
(23)
(4)
–
(27)
2 504
2 506
–
(2)
(790)
(653)
(137)
1 714
Total
7 087
8 828
90
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Rm
Present value of defined-benefit obligation
2017
Balance at the beginning of the year
Current service cost
Interest cost
Contributions by plan participants
Actuarial losses¹
Benefits paid
Impact of foreign currency exchange rate changes
Transfer of Nedbank (Swaziland) Limited and Nedbank (Lesotho) Limited to
Nedbank Group Limited
Balance at the end of the year
2016
Balance at the beginning of the year
Current service cost
Past service cost – vested benefit
Interest cost
Contributions by plan participants
Actuarial (losses)/gains¹
Benefits paid
Impact of foreign currency exchange rate changes
Balance at the end of the year
Fair value of plan assets
2017
Balance at the beginning of the year
Expected return on plan assets
Actuarial gains/(losses)¹
Contributions by the employer
Contributions by plan participants
Benefits paid
Scheme-settled administration costs
Impact of foreign currency exchange rate changes
Transfer of Nedbank (Swaziland) Limited and Nedbank (Lesotho) Limited to
Nedbank Group Limited
Balance at the end of the year
2016
Balance at the beginning of the year
Expected return on plan assets
Actuarial losses¹
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
4 954
22
403
5
(169)
(401)
5
(203)
4 616
5 065
27
6
465
10
(113)
(371)
(135)
2 133
98
214
(163)
(79)
2 203
1 832
74
202
97
(72)
Total
7 087
120
617
5
(332)
(480)
5
(203)
6 819
6 897
101
6
667
10
(16)
(443)
(135)
4 954
2 133
7 087
7 485
1 343
8 828
635
243
24
5
(401)
(7)
(1)
(203)
7 780
7 576
715
(610)
37
10
(371)
(13)
141
131
(24)
69
766
219
93
5
(78)
(479)
(7)
(1)
(203)
9 221
1 441
1 254
8 830
135
(40)
66
(72)
850
(650)
103
10
(443)
(13)
141
7 485
1 343
8 828
¹
The R375m (2016: R233m loss) recognised in other comprehensive income is the sum of the actuarial loss/gain on the plan liabilities and the actuarial
gain/loss on plan assets less taxation, less the IAS 19 paragraph 65 limit.
Nedbank Limited – Annual Report 2017
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
2017
Current service cost
Interest (received)/cost
Scheme-settled plan administration costs
Past service cost
Effect of application of asset ceiling
2016
Current service cost
Interest (received)/cost
Scheme-settled plan administration costs
Past service cost
Effect of application of asset ceiling
Movements in net asset/(liability) recognised
2017
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
2016
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 (%)
2017
Equity instruments
Debt instruments
Property
Cash
International
2016
Equity instruments
Debt instruments
Property
Cash
International
Other
Actual return on plan assets (Rm)
2017
2016
92
Nedbank Limited – Annual Report 2017
22
(232)
8
5
1
98
83
120
(149)
8
5
1
(196)
181
(15)
74
67
27
(250)
13
6
2
(202)
141
2 504
196
373
24
3
(790)
(181)
141
68
101
(183)
13
6
2
(61)
1 714
15
514
92
3
3 100
(762)
2 338
2 454
202
(462)
37
273
2 504
27,10
25,62
4,11
19,34
23,83
(578)
(141)
(137)
66
(790)
84,00
16,00
1 876
61
(599)
103
273
1 714
23,16
34,24
3,48
19,24
19,88
100,00
100,00
100,00
33,32
34,33
5,57
3,66
23,12
23,00
7,00
3,00
49,00
15,00
3,00
31,76
30,16
5,18
10,55
21,89
0,46
100,00
100,00
100,00
878
105
107
95
985
200
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Principal actuarial assumptions (%)
2017
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)
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)
SENSITIVITY ANALYSIS
Range
Used in
valuation
2,45–8,80
9,60–9,60
2,45–8,80
10
2,25–5,80
6,00–6,00
6,80–6,80
0,55–5,80
6,00
7,50–7,50
60–60
60
2,80–9,30
9,80–9,80
2,80–9,30
9,8
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
Defined-benefit obligation
The defined-benefit obligation has been recalculated to show the effect of the discount rate and inflation rate assumptions
on the defined-benefit obligation by adding and subtracting 1% to each assumption. This sensitivity analysis is for Nedgroup
Pension Fund.
Rm
Defined-benefit obligation
Change (%)
Main result
4 247
Discount
rate plus
1%
Dicount
rate minus
1%
Inflation
rate plus
1%
Inflation
rate minus
1%
4 025
(5,2)
4 509
6,2
4 519
6,4
4 014
(5,5)
Medical aid accrued liability
The sensitivity analysis provided below shows the impact of changes to these assumptions on the accrued liability value as at
31 December 2017.
Rm
Medical aid accrued liability
Change (%)
Main result
2 204
Medical
subsidy rate
plus 1%
Medical
subsidy rate
minus 1%
Discount
rate plus
0,5%
Discount
rate minus
0,5%
2 536
15,1
1 933
(12,3)
2 058
(6,6)
2 367
7,4
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
2017
8,45%
8,45%
6,42%
5,51%
2016
8,95%
8,95%
7,07%
6,29%
Nedbank Limited – Annual Report 2017
93
H1
Long-term employee benefits (continued)
H1.1 Analysis of long-term employee benefits assets and liabilities (continued)
H1.1.2 Postemployment benefits (continued)
SENSITIVITY ANALYSIS (continued)
Medical aid funds
The overall expected long-term rate of return on plan assets is 9,6%. 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 obligations for
the past five years
2017
2016
2015
2014
2013
2012
Experience adjustments on fair value of plan assets for the past five years
2017
2016
2015
2014
2013
2012
Estimate of future contributions
Contributions expected for ensuing year
Rm
Fund surplus/(deficit) for the past five years
Pension funds
2017
2016
2015
2014
2013
2012
Medical aid funds
2017
2016
2015
2014
2013
2012
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
2017
Rm
2016
Rm
163
(97)
113
(42)
148
18
(24)
(40)
(14)
(24)
28
18
115
(161)
24
13
377
28
(24)
(40)
(14)
(24)
28
18
24
(48)
(64)
(89)
55
229
10
24
Present
value
of obligation
Fair value
of plan
asset
Surplus/
(Deficit)
4 616
4 954
5 065
5 024
4 781
4 784
2 203
2 133
1 832
1 772
1 571
1 584
7 780
7 485
7 576
7 053
6 520
5 635
1 441
1 343
1 254
1 170
893
854
2017
59
333
(46)
(271)
3 164
2 531
2 511
2 029
1 739
851
(762)
(790)
(578)
(602)
(678)
(730)
2016
49
332
(39)
(269)
94
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
H2 Non-current assets held for sale
Accounting policy
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
Properties sold not yet transferred¹
Previously included in
Property and equipment
2017
Rm
388
388
2016
Rm
287
287
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
2017
Rm
2016
Rm
7 332
7 332
8 164
8 164
Nedbank Limited – Annual Report 2017
95
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 or 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 FVTPL
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.
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-rate 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.
96
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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 AFS 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 OCI, 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 or 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 OCI.
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-rate
method of any difference between the initial contractual amount and the maturity amount, less any cumulative
impairment losses.
The effective-interest-rate method is a method of calculating the amortised cost of a financial 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.
Nedbank Limited – Annual Report 2017
97
SECTION I: FINANCIAL INSTRUMENTS (continued)
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.
■ AFS 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 AFS are not reversed through profit or loss.
If, in a subsequent period, the fair value of a debt instrument classified as AFS 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.
98
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Accounting policy (continued)
■ Maximum credit risk
Credit risk arises principally from loans and advances to clients, investment securities, derivatives and irrevocable
commitments to provide facilities. The maximum credit risk is typically the gross carrying amount, net of any 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.
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.
Sale and repurchase agreements and lending of securities
Securities sold subject to linked repurchase agreements are retained in the financial statements, as the group retains all
risks and rewards of ownership of the securities. The securities are recorded as trading or investment securities and the
counterparty liability is included in amounts owed to other depositors, deposits from other banks, or other money market
deposits, as appropriate. Securities purchased under agreements to resell are recorded as loans and advances to other
banks or clients, as appropriate. The difference between the sale and repurchase price is treated as interest and
recognised over the duration of the agreements using the effective-interest-rate method.
Securities lent to counterparties are also retained in the financial statements and any interest earned is recognised in
profit or loss using the effective-interest-rate method. Securities borrowed are not recognised in the financial
statements, unless these are sold to third parties, in which case the purchase and sale are recorded with the gain or loss
included in non-interest revenue. The obligation to return them is recorded at fair value as a trading liability.
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.
Nedbank Limited – Annual Report 2017
99
SECTION I: FINANCIAL INSTRUMENTS (continued)
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 FVTPL, 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 OCI 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.
100
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
SECTION I: FINANCIAL INSTRUMENTS (continued)
New standards and interpretations not yet adopted (continued)
IFRS 9: Financial Instruments
IFRS 9: Financial Instruments (IFRS 9) was issued in July 2014 and will replace IAS 39: Financial Instruments: Recognition
and Measurement. The standard is effective and will be implemented by the group from 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. IFRS 9’s enhanced disclosure requirements will result in improved credit risk disclosures and
increased transparency with respect to impairment judgements and estimates.
As permitted by the transitional provisions of IFRS 9, the group has elected not to restate comparative figures.
Any adjustments to the carrying amount of financial assets and financial liabilities at the date of transition will be
recognised in the opening retained earnings and other reserves at 1 January 2018. The group has elected to continue to
apply the hedge accounting requirements of IAS 39 on adoption of IFRS 9.
■ Classification and measurement
Financial assets are classified based on (i) the business model within which the financial assets are held and managed
and (ii) the contractual cashflow characteristics of the financial assets, whether the cashflows represent ’solely payments
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’ business model).
Financial assets are measured at fair value through other comprehensive income (FVOCI) 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’ business model’).
Movements in the carrying amount of these financial assets should be taken through other comprehensive income (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.
The remaining financial assets are measured at fair value through profit or loss (FVTPL). All derivative instruments that
are either financial assets or financial liabilities will continue to be classified as held for trading and measured at fair value
through profit or loss.
Nedbank Limited – Annual Report 2017
101
SECTION I: FINANCIAL INSTRUMENTS (continued)
New standards and interpretations not yet adopted
IFRS 9: Financial Instruments (continued)
The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at FVTPL.
Changes in the fair value of these financial liabilities that 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.
For equity investments that are neither held for trading nor contingent consideration, the group may irrevocably elect
to present subsequent changes in fair value of these equity investments in other comprehensive income (OCI). Where
the equity investment 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.
Alternatively, where the group does not make the aforementioned election, fair-value changes are recognised in profit
or loss. This election is made on an investment by investment basis.
On the initial application of IFRS 9, an entity may revoke its previous designation of a financial assets and financial
liabilities measured at fair value through profit or loss (fair value option) with the loans being reclassified into
amortised cost or FVOCI depending on the entity’s business model for the asset.
■ Impairments
Impairments in terms of IFRS 9 will be determined based on an expected credit loss (ECL) model rather than the
current incurred loss model required by IAS 39. The group will be required to recognise an allowance for either 12-month
or lifetime 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 financial assets measured at amortised cost and FVOCI, lease receivables and certain loan
commitments as well as financial guarantee contracts.
102
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
New standards and interpretations not yet adopted
IFRS 9: Financial Instruments (continued)
The IFRS 9 impairment implementation progressed during 2017. The following were the main areas of focus for 2017:
■ Finalisation of the IFRS 9 impairment model methodology.
■ Implementation of an IT framework facilitating efficient model execution and management.
■ Development, build and testing of IFRS 9 impairment models with respect to a substantial portion of the group’s
portfolios, leveraging off the aforementioned IT framework.
■ Documentation and implementation of the relevant control environment and related governance processes.
■ Transitional impact
The implementation of the IFRS 9 ECL requirements increases balance sheet impairments at 1 January 2018 by
approximately R3,0bn, with reserves decreasing by approximately R2,2bn on an after-tax basis. The following areas will
continue to receive attention as the implementation of IFRS 9 progresses during the 2018 financial reporting period:
■ Further refinement of certain models;
■ Finalisation of the reporting and disclosure framework, and completion of the supporting business rules; and
■ Observing local and international industry trends with respect to IFRS 9 adoption.
The group has implemented the following classification and measurement changes on adoption of IFRS 9:
■ Revocation of the fair value through profit or loss designation for certain loans and advances, amounts owed to
depositors and long-term debt instruments to facilitate the implementation of macro fair-value hedge accounting
of interest rate risk and hedge accounting of inflation risk. It is anticipated that the aforementioned changes will
reduce accounting volatility experienced with respect to fair value through profit or loss accounting;
■ Reclassified certain loans from amortised cost including the IFRS 9 ECL impact above to FVOCI and FVTPL due to
the group’s business models for the affected portfolios; and
■ Reviewed the effective-interest-rate calculation for certain loans based on the additional guidance provided in
IFRS 9.
The implementation of the IFRS 9 classification and measurement requirements decreases reserves at 1 January 2018
by approximately R200m.
These estimates are based on accounting policies, assumptions, judgements and estimation techniques, which will be
regularly reviewed and assessed during the year in preparation for the financial statements for the year ending
31 December 2018.
Nedbank Limited – Annual Report 2017
103
I1 Consolidated statement of financial position – categories of financial instruments
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
Notes
Total
Rm
trading
Designated¹
assets
investments
receivables
Rm
Rm
Rm
Rm
Rm
cost
Rm
and equity
Rm
2017
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
Holders of preference shares
Holders of 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
C1.1
H3
F1
H2
F2
B8.3
G1
H1.1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1.1
D2
8 823
73 472
30 698
48 749
689 637
7 332
75
2 250
388
3 277
37
7 976
5 761
18 145
7 341
903 961
28
19 182
48 215
67 425
3 561
561
2 600
7
74 154
23 561
736 752
14 047
191
351
3 423
51 482
829 807
903 961
46 811
30 698
6 265
19 598
1 468
10 271
57 934
25 193
3 351
24 437
1 820
430
3 053
103 372
74 546
3 781
49 630
650 830
–
–
–
–
23 561
23 201
2 436
54 694
49 198
49 198
348
55 042
55 042
–
–
–
–
–
–
–
–
8 823
4 425
612 105
7 332
18 145
75
388
224
37
7 976
5 761
7 341
21 802
28
19 182
48 215
67 425
3 561
561
2 600
7
1 000
191
351
3 423
4 965
79 119
–
74 154
–
–
658 857
10 611
51 134
720 602
720 602
–
–
–
–
104
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I1 Consolidated statement of financial position – categories of financial instruments
Investments in private-equity associates, associate companies and joint arrangements
2017
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
Holders of preference shares
Holders of 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.
Notes
Total
Rm
C6
C4
C7
C3
C1.1
H3
F1
H2
F2
B8.3
G1
H1.1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1.1
D2
8 823
73 472
30 698
48 749
689 637
7 332
75
2 250
388
3 277
37
7 976
5 761
18 145
7 341
903 961
28
19 182
48 215
67 425
3 561
561
2 600
7
74 154
23 561
736 752
14 047
191
351
3 423
51 482
829 807
903 961
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
46 811
30 698
6 265
19 598
1 468
10 271
57 934
25 193
3 351
24 437
1 820
430
3 053
8 823
4 425
612 105
7 332
18 145
103 372
74 546
3 781
49 630
650 830
–
–
–
–
23 561
23 201
2 436
54 694
49 198
49 198
348
55 042
55 042
–
–
–
–
–
–
–
–
–
–
–
–
75
388
224
37
7 976
5 761
7 341
21 802
28
19 182
48 215
67 425
3 561
561
2 600
7
–
–
–
74 154
658 857
10 611
51 134
720 602
720 602
1 000
191
351
3 423
4 965
79 119
Nedbank Limited – Annual Report 2017
105
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
Available-
for-sale
financial
Held-to-
maturity
Financial
liabilities at
Loans and
amortised
Non-
financial
assets,
liabilities
and equity
Rm
2016
Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities2
Loans and advances3, 4
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
Holders of additional tier 1 capital instruments
Non-controlling interest attributable to ordinary shareholders
Total equity
Derivative financial instruments
Amounts owed to depositors5
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
C1.1
H3
F1
H2
F2
B8.3
G1
H1.1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1.1
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
900 061
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
1 Refer to note I4 in respect of financial instruments designated as at FVTPL.
2 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
3 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
4 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
5 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities
at amortised cost categories have been restated to reflect the correct classification.
106
Nedbank Limited – Annual Report 2017
At fair value through
profit or loss
Held for
33 312
18 044
18 851
19 450
5
20 241
33 184
740
22 393
1 722
8 703
56 883
2 350
1 477
431
615 592
8 159
18 139
440
287
225
266
8 197
5 042
5 928
28
19 182
42 698
61 908
3 561
2 000
253
67 722
978
53
391
3 328
4 750
72 472
89 662
71 135
1 171
55 577
662 131
–
20 385
–
–
13 469
11 781
2 612
–
–
54 422
27 862
27 862
301
54 723
54 723
–
–
–
–
–
–
–
–
–
–
–
–
–
–
684 116
9 127
51 761
745 004
745 004
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I1 Consolidated statement of financial position – categories of financial instruments
(continued)
2016
Assets
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities2
Loans and advances3, 4
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
Holders of additional tier 1 capital instruments
Non-controlling interest attributable to ordinary shareholders
Total equity
Derivative financial instruments
Amounts owed to depositors5
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
Notes
Total
Rm
C6
C4
C7
C3
C1.1
H3
F1
H2
F2
B8.3
G1
H1.1
C6
G2
B3.1
B3.2
B4
C7
D1
K1.1
B8.3
H1.1
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
900 061
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
1 Refer to note I4 in respect of financial instruments designated as at FVTPL.
2 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
3 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
4 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
5 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities
at amortised cost categories have been restated to reflect the correct classification.
Investments in private-equity associates, associate companies and joint arrangements
1 477
431
2 350
At fair value through
profit or loss
Held for
trading
Rm
Designated¹
Rm
33 312
18 044
18 851
19 450
5
1 722
8 703
56 883
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
20 241
33 184
740
22 393
615 592
8 159
18 139
440
287
225
266
8 197
5 042
5 928
89 662
71 135
1 171
55 577
662 131
–
20 385
–
–
13 469
11 781
2 612
–
–
54 422
27 862
27 862
301
54 723
54 723
–
–
–
–
–
–
–
–
28
19 182
42 698
61 908
3 561
2 000
253
67 722
978
53
391
3 328
4 750
72 472
–
–
–
–
–
–
684 116
9 127
51 761
745 004
745 004
Nedbank Limited – Annual Report 2017
107
I2 Fair-value measurement – financial instruments
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.
108
Nedbank Limited – Annual Report 2017
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 2017
109
I2 Fair-value measurement – financial instruments (continued)
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 JSE Limited 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.
110
Nedbank Limited – Annual Report 2017
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 or loss in the consolidated statement of comprehensive income.
■ Counterparty credit spreads: Adjustments are made to market prices when the creditworthiness of the counterparty
differs from that of the assumed counterparty in the market price (or parameter).
VALUATION TECHNIQUES BY INSTRUMENT
Other short-term securities and government and other securities
The fair value of these instruments is based on quoted market prices from an exchange dealer, broker, industry group or
pricing service, when available. When they are unavailable, the fair value is determined by reference to quoted market prices
for similar instruments, adjusted, as appropriate, for the specific circumstances of the instruments.
Where these instruments include corporate bonds, the bonds are valued using observable active quoted prices or recently
executed transactions, except where observable price quotations are not available. Where price quotations are not available,
the fair value is determined based on cashflow models, where significant inputs may include yield curves and bond or single-
name credit default swap spreads.
Derivative financial instruments
Derivative contracts can be traded either 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.
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 Limited-
specific credit-adjusted yield curve that reflects the level at which the group would issue similar instruments at the reporting
date. The market risk parameters are valued consistently to similar instruments held as assets.
Nedbank Limited – Annual Report 2017
111
I2 Fair-value measurement – financial instruments (continued)
I2.1 Valuation of financial instruments (continued)
VALUATION TECHNIQUES BY INSTRUMENT (continued)
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.
112
Nedbank Limited – Annual Report 2017
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 rates 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
Discount rates
Interest rate curves
Money market rates and interest rates
Underlying price of market-traded
instruments
Liabilities
Derivative financial instruments
Discounted-cashflow model
Discount rates
Dividend yield method
Dividend growth rates
Black-Scholes model
Risk-free rates 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 2017
113
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy
I2.2.1 Financial assets
Rm
2017
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
2016
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities1
Loans and advances2, 3
Other assets
Investments in private-equity associates, associate companies and
joint arrangements
Investment securities
Total
financial
assets
recognised
at amortised
cost
Total
financial
assets
recognised
at fair value
Total
financial
assets
Note
Held for trading
Designated at fair value
through profit or loss
Available for sale
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
882 159
700 460
181 699
5 133
98 239
–
55
70 405
4 086
–
3 371
410
C6
C4
C7
C3
C1
H3
F2
F1
C6
C4
C7
C3
C1
H3
F2
F1
26 968
73 472
30 698
48 749
689 637
7 332
3 053
2 250
26 968
25 193
28 862
612 105
7 332
–
48 279
30 698
19 887
77 532
–
3 053
2 250
879 676
717 708
161 968
15 418
74 219
25
38 380
68 218
18 044
50 687
691 925
8 164
2 350
1 908
38 380
33 184
22 393
615 592
8 159
–
35 034
18 044
28 294
76 333
5
2 350
1 908
5 133
46 811
30 698
1 132
19 598
15 340
37
36
5
33 275
17 983
3 511
19 450
25
40
15
560
541
1 468
10 231
57 901
805
67 467
1 722
8 162
56 806
33
3 053
1 000
3 108
77
2 350
681
–
20
761
410
410
3 351
740
19
777
21
410
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
Summary of fair-value hierarchies
Rm
Other short-term securities
Derivative financial instruments
Government and other securities1
Loans and advances2, 3
Other assets
Investments in private-equity associates, associate companies and joint arrangements
Investment securities
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
114
Nedbank Limited – Annual Report 2017
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
2017
2017
2016
2017
48 279
30 698
19 887
77 532
–
3 053
2 250
2016
35 034
18 044
28 294
76 333
5
2 350
1 908
5 173
15 881
2016
37
36
5
19
2017
48 279
30 698
14 714
77 499
2016
34 997
17 983
12 413
76 256
825
798
181 699
161 968
15 978
172 015
142 447
15
5 188
25
77
2 350
1 091
3 543
33
3 053
1 410
4 496
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy
I2.2.1 Financial assets
Investments in private-equity associates, associate companies and
Rm
2017
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
joint arrangements
Investment securities
2016
Cash and cash equivalents
Other short-term securities
Derivative financial instruments
Government and other securities1
Loans and advances2, 3
Other assets
joint arrangements
Investment securities
Summary of fair-value hierarchies
Rm
Other short-term securities
Derivative financial instruments
Government and other securities1
Loans and advances2, 3
Other assets
Investment securities
Investments in private-equity associates, associate companies and
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
Investments in private-equity associates, associate companies and joint arrangements
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
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
26 968
73 472
30 698
48 749
689 637
7 332
3 053
2 250
38 380
68 218
18 044
50 687
691 925
8 164
2 350
1 908
26 968
25 193
28 862
612 105
7 332
38 380
33 184
22 393
615 592
8 159
–
48 279
30 698
19 887
77 532
–
3 053
2 250
–
35 034
18 044
28 294
76 333
5
2 350
1 908
Held for trading
Designated at fair value
through profit or loss
Available for sale
882 159
700 460
181 699
5 133
98 239
–
55
70 405
4 086
–
3 371
410
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
5 133
46 811
30 698
1 132
19 598
879 676
717 708
161 968
15 418
74 219
25
37
36
15 340
5
33 275
17 983
3 511
19 450
25
40
15
560
541
1 468
10 231
57 901
805
67 467
1 722
8 162
56 806
19
777
33
3 053
1 000
3 108
77
2 350
681
3 351
–
20
761
410
410
740
21
410
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
2017
48 279
30 698
19 887
77 532
–
3 053
2 250
2016
35 034
18 044
28 294
76 333
5
2 350
1 908
181 699
161 968
2017
2016
37
36
5 173
15 881
2017
48 279
30 698
14 714
77 499
2016
34 997
17 983
12 413
76 256
5
19
825
798
15 978
172 015
142 447
15
5 188
2017
2016
25
77
2 350
1 091
3 543
33
3 053
1 410
4 496
Nedbank Limited – Annual Report 2017
115
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy (continued)
I2.2.1 Financial assets (continued)
Reconciliation to categorised statement of financial position
Rm
Level 12, 3
Level 21, 2, 3
Level 3
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
Reconciliation to statement of financial position
Rm
Total financial assets
Total non-financial assets
Total assets
Designated at fair value
Held for trading
through profit or loss
Available for sale
2017
2016
5 133
98 239
–
15 418
74 219
25
103 372
89 662
2017
55
70 405
4 086
74 546
2016
560
67 467
3 108
71 135
2017
2016
3 371
410
3 781
761
410
1 171
Note
2017
2016
I1
I1
882 159
879 676
21 802
20 385
903 961
900 061
116
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy (continued)
I2.2.1 Financial assets (continued)
Reconciliation to categorised statement of financial position
Rm
Level 12, 3
Level 21, 2, 3
Level 3
1 A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
2 Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Accordingly, the held-for-trading and financial assets at amortised cost categories have been restated to reflect the
correct classification.
3 Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
Reconciliation to statement of financial position
Rm
Total financial assets
Total non-financial assets
Total assets
Held for trading
2017
2016
5 133
98 239
–
15 418
74 219
25
103 372
89 662
Designated at fair value
through profit or loss
2017
55
70 405
4 086
74 546
2016
560
67 467
3 108
71 135
Available for sale
2017
2016
3 371
410
3 781
761
410
1 171
Note
2017
2016
I1
I1
882 159
879 676
21 802
20 385
903 961
900 061
Nedbank Limited – Annual Report 2017
117
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy (continued)
I2.2.2 Financial liabilities
Rm
2017
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
2016
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
Held for trading
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
824 842
720 602
104 240
–
–
55 042
–
C7
D1
K1.1
D2
C7
D1
K1.1
D2
23 561
736 752
658 857
13 047
51 482
10 611
51 134
827 589
745 004
13 469
750 319
11 739
52 062
684 116
9 127
51 761
23 561
77 895
2 436
348
82 585
13 469
66 203
2 612
301
1 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss 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
1 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss 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 R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss 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 accessible at the measurement date.
Level 2: Valuation techniques using market data that is either directly or indirectly observable. Various factors influence the
availability of observable data and these may vary from product to product and change over time. Factors include, for example, the
depth of activity in the relevant market, the type of product, whether the product is new and not widely traded in the market, the
maturity of market modelling and the nature of the transaction (bespoke or generic).
Level 3: Valuation techniques that include significant inputs that are unobservable. To the extent that a valuation is based on inputs
that are not market-observable the determination of the fair value can be more subjective, dependent on the significance of the
unobservable inputs to the overall valuation. Unobservable inputs are determined based on the best information available and may
include reference to similar instruments, similar maturities, appropriate proxies or other analytical techniques.
118
Nedbank Limited – Annual Report 2017
2 405
2 405
2 246
11
2 235
46 793
23 561
23 201
31
25 616
13 458
11 781
377
–
–
54 723
–
54 694
348
54 422
301
Total financial liabilities
Total financial liabilities
Total financial liabilities
recognised at fair value
classified as level 1
classified as level 2
2017
2016
2017
2017
2016
23 561
77 895
2 436
348
13 469
66 203
2 612
301
2016
11
2 405
2 235
23 561
77 895
31
348
13 458
66 203
377
301
104 240
82 585
2 405
2 246
101 835
80 339
Held for trading
through profit or loss
2017
2016
2017
2016
Designated at fair value
2 405
46 793
49 198
2 246
25 616
27 862
55 042
55 042
54 723
54 723
Note
2017
2016
I1
I1
824 842
827 589
79 119
72 472
903 961
900 061
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2 Fair-value measurement – financial instruments (continued)
I2.2 Fair-value hierarchy (continued)
I2.2.2 Financial liabilities
Total
financial
liabilities
Total
financial
liabilities
Total
recognised
financial
at amortised
recognised
Note
liabilities
cost
at fair value
824 842
720 602
104 240
736 752
658 857
C7
D1
K1.1
D2
C7
D1
K1.1
D2
23 561
13 047
51 482
13 469
750 319
11 739
52 062
23 561
77 895
2 436
348
82 585
13 469
66 203
2 612
301
10 611
51 134
684 116
9 127
51 761
827 589
745 004
Held for trading
Designated at fair value
through profit or loss
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
2 405
2 405
2 246
11
2 235
46 793
23 561
23 201
31
25 616
13 458
11 781
377
–
–
55 042
–
54 694
348
–
–
54 723
–
54 422
301
Total financial liabilities
recognised at fair value
Total financial liabilities
classified as level 1
Total financial liabilities
classified as level 2
1 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities
at amortised cost categories have been restated to reflect the correct classification.
2017
2016
2017
23 561
77 895
2 436
348
13 469
66 203
2 612
301
2016
11
2017
2016
23 561
77 895
31
348
13 458
66 203
377
301
2 405
2 235
Rm
2017
2016
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
1 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities
at amortised cost categories have been restated to reflect the correct classification.
104 240
82 585
2 405
2 246
101 835
80 339
Reconciliation to categorised statement of financial position
Rm
Level 1
Level 21
Reconciliation to statement of financial position
Rm
Total financial liabilities
Total equity and non-financial liabilities
Total equity and liabilities
1 Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss 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 accessible at the measurement date.
Level 2: Valuation techniques using market data that is either directly or indirectly observable. Various factors influence the
availability of observable data and these may vary from product to product and change over time. Factors include, for example, the
depth of activity in the relevant market, the type of product, whether the product is new and not widely traded in the market, the
maturity of market modelling and the nature of the transaction (bespoke or generic).
Level 3: Valuation techniques that include significant inputs that are unobservable. To the extent that a valuation is based on inputs
that are not market-observable the determination of the fair value can be more subjective, dependent on the significance of the
unobservable inputs to the overall valuation. Unobservable inputs are determined based on the best information available and may
include reference to similar instruments, similar maturities, appropriate proxies or other analytical techniques.
Held for trading
Designated at fair value
through profit or loss
2017
2016
2017
2016
2 405
46 793
49 198
2 246
25 616
27 862
55 042
55 042
54 723
54 723
Note
2017
2016
I1
I1
824 842
827 589
79 119
72 472
903 961
900 061
Nedbank Limited – Annual Report 2017
119
I2 Fair-value measurement – financial instruments (continued)
I2.3 Details of changes in valuation techniques
There have been no changes to valuation techniques.
I2.4 Transfers between levels of the fair-value hierarchy
There were no significant transfers between level 1 and level 2 of the fair-value hierarchy during 2017.
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
2017
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
Gains in
non-interest
revenue in
profit for
the year
Opening
balance at
1 January
25
25
3 108
2 350
77
681
410
410
–
130
6
45
79
–
Purchases
Sales and
balance at
and issues
settlements
31 December
Closing
–
1 625
1 358
267
–
(25)
(25)
(777)
(661)
(89)
(27)
–
–
–
4 086
3 053
33
1 000
410
410
Total financial assets classified as level 3
3 543
130
1 625
(802)
4 496
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
Gains in
non-interest
revenue in
profit for
the year
Opening
balance at
1 January
18
18
1 877
1 154
33
690
–
7
7
250
274
4
(28)
–
Total financial assets classified as level 3
1 895
257
1 183
(242)
Gains and losses include, but are not limited to, fair-value gains or losses, translation gains or losses and trading gains or
losses.
Purchases
Sales and
Transfers
balance at
and issues
settlements
from level 2
31 December
Closing
–
–
1 183
1 130
53
–
(242)
(208)
(34)
–
–
40
40
410
410
450
25
25
3 108
2 350
77
681
410
410
3 543
120
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2 Fair-value measurement – financial instruments (continued)
I2.3 Details of changes in valuation techniques
There have been no changes to valuation techniques.
I2.4 Transfers between levels of the fair-value hierarchy
There were no significant transfers between level 1 and level 2 of the fair-value hierarchy during 2017.
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
Investments in private-equity associates, associate companies and joint arrangements
Purchases
and issues
Sales and
settlements
Closing
balance at
31 December
–
1 625
1 358
267
–
(25)
(25)
(777)
(661)
(89)
(27)
–
–
–
4 086
3 053
33
1 000
410
410
Total financial assets classified as level 3
3 543
130
1 625
(802)
4 496
Gains in
non-interest
Opening
revenue in
balance at
1 January
profit for
the year
Purchases
and issues
Sales and
settlements
Transfers
from level 2
Closing
balance at
31 December
Investments in private-equity associates, associate companies and joint arrangements
–
–
1 183
1 130
53
–
(242)
(208)
(34)
–
Total financial assets classified as level 3
1 895
257
1 183
(242)
Gains and losses include, but are not limited to, fair-value gains or losses, translation gains or losses and trading gains or
losses.
–
40
40
410
410
450
25
25
3 108
2 350
77
681
410
410
3 543
Rm
2017
Held for trading
Derivative financial instruments
Designated as at fair value
Loans and advances
Investment securities
Available for sale
Investment securities
Rm
2016
Held for trading
Derivative financial instruments
Designated as at fair value
Loans and advances
Investment securities
Available for sale
Investment securities
Gains in
non-interest
revenue in
profit for
the year
Opening
balance at
1 January
25
25
3 108
2 350
77
681
410
410
18
18
1 877
1 154
33
690
–
–
130
6
45
79
–
7
7
250
274
4
(28)
–
Nedbank Limited – Annual Report 2017
121
Fair-value measurement – financial instruments (continued)
I2
I2.6 Unrealised gains
The unrealised gains arising on instruments classified as level 3 include the following:
Trading income
Private-equity gains
2017
Rm
130
130
2016
Rm
257
257
I2.7 Effect of changes in significant unobservable assumptions to reasonable possible alternatives
The fair-value measurement of financial instruments is, 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
%
Rm
Rm
Rm
Amount recognised
in the statement of
Favourable
Unfavourable
2017
Assets
Loans and advances
Investment securities
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
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
%
Rm
Rm
Rm
Significant
Variance in fair value
financial position
change in value
change in value
Amount recognised
in the statement of
Favourable
Unfavourable
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
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
122
Nedbank Limited – Annual Report 2017
33
1 410
3 053
4 496
25
77
1 091
2 350
3 543
3
132
285
420
2
7
103
221
333
(4)
(166)
(359)
(529)
(3)
(9)
(129)
(278)
(419)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I2
Fair-value measurement – financial instruments (continued)
I2.6 Unrealised gains
The unrealised gains arising on instruments classified as level 3 include the following:
2017
Rm
130
130
2016
Rm
257
257
I2.7 Effect of changes in significant unobservable assumptions to reasonable possible alternatives
The fair-value measurement of financial instruments is, 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:
Trading income
Private-equity gains
2017
Assets
Loans and advances
Investment securities
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
Discounted cashflows
Credit spreads and
between (12) and 9
Discounted cashflows,
Valuation multiples,
between (12) and 9
discount rates
correlations, volatilities
and credit spreads
adjusted net asset
value, earnings
multiples, third-party
valuations, dividend
yields
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
33
1 410
3 053
4 496
3
132
285
420
(4)
(166)
(359)
(529)
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
2016
Assets
Derivative financial instruments
Loans and advances
Investment securities
Discounted cashflows
Discount rates, Ebitda
Discounted cashflows
Credit spreads and
discount rates
Discounted cashflows,
Valuation multiples,
adjusted net asset value,
correlations, volatilities
and credit spreads
earnings multiples,
third-party valuations,
dividend yields
between (12) and 9
between (12) and 9
between (12) and 9
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)
Nedbank Limited – Annual Report 2017
123
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:
Rm
2017
Financial assets
Other short-term securities
Government and other securities
Loans and advances
Financial liabilities
Long-term debt instruments
Rm
2016
Financial assets
Other short-term securities
Government and other securities
Loans and advances1
Financial liabilities
Long-term debt instruments
Carrying
value
Fair
value
Level 1
Level 2
Level 3
666 160
661 408
23 993
25 193
28 862
25 130
28 825
612 105
607 453
23 993
29 962
25 130
4 832
51 134
51 134
52 028
52 028
23 975
23 975
28 053
28 053
607 453
607 453
–
Carrying
value
Fair
value
Level 1
Level 2
Level 3
671 169
661 807
21 828
33 184
22 393
33 128
21 828
615 592
606 851
21 828
33 128
33 128
606 851
606 851
–
51 761
51 761
48 880
48 880
20 432
20 432
28 448
28 448
¹
Loans and advances of R10 128m were included in the previous year as held-for-trading assets, whereas these instruments were classified and measured
as financial assets at amortised cost. Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss,
whereas these instruments were classified and measured as financial assets at amortised cost. Accordingly, the held-for-trading, designated at fair value
through profit or loss and financial assets at amortised cost categories have been restated to reflect the correct classification.
Loans and advances
Loans and advances, recognised in note C1.1, 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 disposal 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 2018 to 2020 (2016: for the periods 2017 to 2019) 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.
124
Nedbank Limited – Annual Report 2017
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 of variable-rate liabilities. The carrying value of the amounts owed to
depositors approximates fair value because the instruments reprice to current market rates at frequent intervals. In addition,
a significant portion of the balance is callable or is short term in nature.
Cash and cash equivalents, other assets, mandatory deposits with central banks, and provisions and other
liabilities
The carrying values of cash and cash equivalents, other assets, mandatory deposits with central banks and provisions and
other liabilities are considered a reasonable approximation of their respective fair values, as they are either short term in
nature or are repriced to current market rates at frequent intervals.
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 2017
125
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
Rm
Negotiable certificates of deposit
Treasury bills and other bonds
Government guaranteed2
Other dated securities
Mortgage loans
Net finance lease and instalment
debtors
Leases and debentures
Preference shares
Loans and advances (secured and
unsecured)
Foreign client lending3
Other loans
Private-equity associates, associate
companies and joint arrangements
Listed investments
Unlisted investments
2017
1 468
319
9 952
2016
1 186
537
1 287
7 416
24 030
20 778
20 691
20 247
54
57
5 548
7 554
3 053
15
1 805
74 546
69
942
6 345
368
8 133
2 350
19
1 458
71 135
2017
2016
2017
2016
–
–
–
–
¹ Positive amounts represent gains while negative amounts represent losses.
2
A total of R786m of government and other securities were designated at fair value through profit or loss. However, they were incorrectly included in the
held-for-trading category in the prior year. The classification of these instruments has now been corrected.
3
Loans and advances of R3 326m were included in the previous year as designated at fair value through profit or loss, whereas these instruments were
classified and measured as financial assets at amortised cost. Accordingly, the designated at fair value through profit or loss and financial assets at
amortised cost categories have been restated to reflect the correct classification.
Nedbank Limited has estimated the change in credit risk as being the amount arising from the change in fair value of the
financial instrument that is not attributable to changes in market conditions that give rise to market risk. Individual credit
spreads for loans or receivables that have been designated as at 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.
126
Nedbank Limited – Annual Report 2017
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
2017
Long-term debt instruments
Call and term deposits
Negotiable certificates of deposit
2016
Long-term debt instruments
Call and term deposits
Foreign currency liabilities2
Negotiable certificates of deposit
Contractually
payable at
maturity
Fair value
Change in fair value due to
change in credit risk¹
Current
period
Cumulative
348
37 683
17 011
55 042
301
33 988
1
20 433
54 723
348
37 616
17 011
54 975
283
33 963
1
20 415
54 662
(99)
(36)
(135)
(38)
(35)
(73)
(127)
(79)
(206)
(61)
(89)
(150)
¹ Positive amounts represent losses while negative amounts represent gains.
2
Amounts owed to depositors of R9 332m were included in the previous year as designated at fair value through profit or loss, whereas these instruments
were classified and measured as financial liabilities at amortised cost. Accordingly, the designated at fair value through profit or loss and financial liabilities
at amortised cost categories have been restated to reflect the correct classification.
The change in fair value due to credit risk has been determined as the difference between fair values determined using a
credit-adjusted liability curve and a risk-free liability curve.
The curves are constructed using a standard ’bootstrapping’ process to derive a zero-coupon yield curve. The credit-adjusted
curve was based on offer rates of negotiable certificates of deposit and promissory notes with maturity periods of up to five
years, and thereafter the offer rates of issued Nedbank Limited bonds are applied.
Nedbank Limited – Annual Report 2017
127
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
2017
Financial assets
Derivative financial assets
Loans and advances
Cash and cash equivalents
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
2016
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
Net amounts
Amounts not
Total amounts
may be netted
reflecting the
subject to
recognised in
off on the
effect of
IFRS 7
the statement
occurrence of
master netting
a future event
arrangements
offsetting
disclosure²
of financial
position
(978)
(40 107)
(3 286)
(44 371)
7 507
36 864
44 371
(5 909)
(28 478)
(34 387)
5 909
28 478
34 387
29 616
22 919
1 486
54 021
(23 011)
(179 906)
(202 917)
17 531
3 962
21 493
(13 169)
(65 101)
(78 270)
(26 875)
(26 875)
(21 319)
(21 319)
(12 939)
(12 939)
6 787
6 787
2 741
22 919
1 486
27 146
(44 330)
(179 906)
(224 236)
4 592
3 962
8 554
(6 382)
(65 101)
(71 483)
1 082
666 718
7 337
675 137
(550)
(556 846)
(557 396)
513
687 963
688 476
(300)
(685 218)
(685 518)
30 698
689 637
8 823
729 158
(23 561)
(736 752)
(760 313)
18 044
691 925
709 969
(13 469)
(750 319)
(763 788)
Gross
amounts
30 594
63 026
4 772
98 392
(30 518)
(216 770)
(247 288)
23 440
32 440
55 880
(19 078)
(93 579)
(112 657)
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.
128
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
I5 Offsetting financial assets and financial liabilities
Accounting policy
of financial position.
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
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
simultaneously.
■ 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.
Rm
2017
Financial assets
Derivative financial assets
Loans and advances
Cash and cash equivalents
Total financial assets
Financial liabilities
Derivative financial liabilities
Amounts owed to depositors
Total financial liabilities
2016
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.
Effects of netting on the statement
of financial position
Amounts set off
in the statement
Net amounts
of financial
position in
accordance
with IAS 32
included in
the statement
of financial
position¹
Gross
amounts
30 594
63 026
4 772
98 392
(30 518)
(216 770)
(247 288)
23 440
32 440
55 880
(19 078)
(93 579)
(112 657)
(978)
(40 107)
(3 286)
(44 371)
7 507
36 864
44 371
(5 909)
(28 478)
(34 387)
5 909
28 478
34 387
29 616
22 919
1 486
54 021
(23 011)
(179 906)
(202 917)
17 531
3 962
21 493
(13 169)
(65 101)
(78 270)
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
Total amounts
recognised in
the statement
of financial
position
(26 875)
(26 875)
(21 319)
(21 319)
(12 939)
(12 939)
6 787
6 787
2 741
22 919
1 486
27 146
(44 330)
(179 906)
(224 236)
4 592
3 962
8 554
(6 382)
(65 101)
(71 483)
1 082
666 718
7 337
675 137
(550)
(556 846)
(557 396)
513
687 963
688 476
(300)
(685 218)
(685 518)
30 698
689 637
8 823
729 158
(23 561)
(736 752)
(760 313)
18 044
691 925
709 969
(13 469)
(750 319)
(763 788)
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 2017
129
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 R28 538m (2016: R19 162m) 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 R24 615m (2016: R19 127m) 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 with 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.
130
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
(ii) Wholesale portfolio:
■ commercial properties are supported by the property financed and a cession of the leases;
■ instalment credit type of transactions that are secured by the assets financed;
■ working capital facilities when secured usually by either a claim on specific assets (fixed assets, inventories or trade
debtors) or other collateral such as guarantees;
■ term and structured lending, which usually relies on guarantees or credit derivatives (where only internationally recognised
and enforceable agreements are used); and
■ credit exposure to other banks where the risk is commonly mitigated through the use of financial control and netting
agreements.
The valuation and management of collateral across all business units of the group are governed by the Group Credit Policy.
Management considers collateral held in the retail portfolio to be homogenous by nature and therefore more reliably
identifiable. Generally, valuations in respect of mortgage portfolios are updated using statistical index models, published
data by service providers are used for motor vehicles and physical inspection is performed for other types of collateral.
Physical valuations are performed six-monthly on the defaulted book. At 31 December 2017 management considered
R192 015m (2016: R183 231m) to be a reasonable estimate of the gross 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 2017 management considered R254 261m (2016: R234 139m) to be a reasonable estimate
of the gross collateral held in the wholesale portfolio.
During 2017 the group reviewed the classification of collateral held by securitisation vehicles and Nedbank Wealth. As a
result, R43bn of collateral was reallocated from the wholesale portfolio to the retail portfolio to reflect the nature of the
underlying collateral more accurately. Comparative information for 2016 has been restated accordingly.
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 in the absence of default. The fair value of these securities at the reporting date amount to R17 828m
(2016: R14 359m), of which Rnil (2016: 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 R96m (2016: R120m), which represents assets the group has
acquired during the year by taking possession of collateral held as security.
Nedbank Limited – Annual Report 2017
131
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, 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 Limited shares, share options over Nedbank Group Limited shares and equity instruments in respect of
Nedbank Group Limited shares are granted to employees as part of their remuneration package as services are rendered,
as well as to clients, business partners and affinity groups as an incentive to retain business and 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 reliably estimate 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.
132
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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
n/a
Nedbank UK
Long-term
Incentive Plan
(LTIP)
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 Limited 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 Limited performance
target. Where this
performance target is not
met, 50% will vest provided
that the 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 2017
133
Description
Vesting requirements
Maximum
term
3 years
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
J1 Description of arrangements (continued)
Trust/Special-
purpose
vehicle (SPV)
n/a
Scheme
Nedbank Wealth
Management
International
Long-term
Incentive Plan
(LTIP)
n/a
Nedbank Wealth
Management
International
Matched Scheme
Nedbank Africa
Restricted-share
Scheme
n/a
Nedbank Africa
Matched-share
Scheme
n/a
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.
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.
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
3 years
Completion of three years’
service, from grant date,
subject to corporate
performance targets being
met.
3 years
3 years
Three years’ service and
achievement of corporate
performance targets.
Where these performance
targets are not met, 50%
will vest provided that the
three years’ service has been
reached.
134
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Scheme
Trust/Special-
purpose
vehicle (SPV)
Description
Vesting requirements
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.
NEDBANK SWAZILAND SINAKEKELWE SCHEMES – BEE AND LTIP
Maximum
term
7 years
7 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
No dealing in these shares
during the restricted period
of five years.
5 years
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.
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.
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 2017
135
J2 Effect on profit and financial position
Traditional employee schemes
589
548
1 184
1 135
Share-based payments
expense
Share-based payments
reserve/liability
2017
Rm
2016
Rm
2017
Rm
2016
Rm
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 Wealth Management Incentive Scheme¹
Nedbank Africa Restricted-share Scheme and Matched-share
Scheme¹
Nedbank Eyethu BEE schemes
Black Executive Scheme
Black Management Scheme
¹ This scheme is cash-settled and therefore creates a liability.
477
122
(18)
1
(1)
1
1
6
2
2
434
109
(2)
1
1
1
4
12
10
2
909
239
10
3
9
2
1
11
21
18
3
879
223
15
2
8
3
5
42
33
9
591
560
1 205
1 177
2017
2016
Number of
instruments
Weighted-
average
exercise
price
R
Number of
instruments
Weighted-
average
exercise
price
R
J3 Movements in number of instruments
Nedbank Group (2005) Share Option and Restricted-share
Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Outstanding at the end of the year
9 630 296
3 252 604
(495 899)
(2 985 722)
9 401 279
9 234 425
3 990 166
(471 075)
(3 123 220)
9 630 296
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
–
–
251,80
–
–
190,74
Nedbank Group (2005) Matched-share Scheme
Outstanding at the beginning of the year
Granted
Forfeited
Exercised
Outstanding at the end of the year
2 213 243
811 034
(175 301)
(603 753)
2 245 223
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
–
–
241,50
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)
Nedbank UK Matched-share Scheme
Outstanding at the beginning of the year
Granted
Exercised
Outstanding at the end of the year
102 536
43 932
(52 336)
94 132
–
14 249
5 341
(2 811)
16 779
–
–
1 917 120
991 867
(202 744)
(493 000)
2 213 243
–
119 502
22 566
(1 172)
(38 360)
102 536
–
16 811
4 198
(6 760)
14 249
–
189,10
–
–
136
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
J3 Movements in number of instruments
(continued)
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 Restricted-share Scheme
Outstanding at the beginning of the year
Granted
Granted prior year
Forfeited
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
Nedbank Africa Matched-share Scheme
Granted
Granted prior year
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (GBP)
Black Executive Scheme
Outstanding at the beginning of the year
Forfeited
Exercised
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
Black Management Scheme
Outstanding at the beginning of the year
Forfeited
Exercised
Other movements
Expired
Outstanding at the end of the year
Exercisable at the end of the year
Weighted-average share price for share instruments exercised (R)
2017
2016
Number of
instruments
Weighted-
average
exercise
price
R
Number of
instruments
Weighted-
average
exercise
price
R
–
72 917
22 624
(19 274)
76 267
–
15 915
4 757
(7 613)
13 059
–
56 270
49 496
5 770
(4 272)
107 264
–
731
2 109
2 840
–
518 456
(52 104)
(179 251)
287 101
79 087
277 806
(20 686)
(168 581)
(5 291)
83 248
63 599
–
–
–
–
–
–
–
–
–
–
–
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
–
–
–
–
–
–
–
–
–
–
–
–
–
820 207
241,38
(301 751)
518 456
26 001
706 559
(48 357)
(377 842)
6 355
(8 909)
277 806
96 001
170,79
237,03
137,08
242,05
162,29
194,31
248,07
126,03
77,69
132,49
197,05
Nedbank Limited – Annual Report 2017
137
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
140,00
161,88
182,98
189,90
Black Management Scheme
0,00
121,08
128,44
132,18
139,69
161,88
Nedbank Africa Restricted-share Scheme
0,00
Nedbank Africa Matched-share Scheme
0,00
2017
2016
Weighted-
average
remaining
contractual
life (years)
Number of
instruments
Weighted-
average
remaining
contractual
life (years)
Number of
instruments
9 401 279
9 401 279
2 245 223
2 245 223
94 132
94 132
16 779
16 779
76 267
76 267
13 059
13 059
1,3
1,3
1,3
1,3
1,4
1,4
1,1
1,1
1,2
1,2
1,0
1,0
70 508
0,7
104 906
41 509
70 178
287 101
1 737
34 749
18 893
27 869
83 248
107 264
107 264
2 840
2 840
1,2
1,6
2,2
1,4
1,2
0,1
1,2
0,2
1,8
1,8
1,4
1,4
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
56 270
1,7
138
Nedbank Limited – Annual Report 2017
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
Restricted-
share
Scheme
Nedbank
Africa
Matched-
share
Scheme
2017
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)
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)
3 252 604
811 034
43 932
5 341
22 624
4 757
49 496
731
261,40
193,47
255,74
193,47
263,31
193,47
261,26
193,47
261,87
241,50
260,26
241,50
263,31
241,50
261,26
241,50
26,9
0,3
26,9
26,8
26,8
26,8
26,9
26,8
3
3
3
3
3
3
3
3
7,4
7,7
1 437
1 730
3
3
7
3
6
3
12
3
17
3
7,3
65
3
7,4
1
3
3 983 062
989 936
22 566
4 198
33 130
4 180
31 090
31 090
183,73
161,97
183,18
161,97
183,18
183,18
183,73
194,33
183,19
194,25
183,19
194,25
183,19
183,19
25,7
25,7
3
3
8,2
8,2
1 353
1 648
3
3
25,7
25,7
25,7
25,7
3
3
3
3
6
3
4
3
11
3
13
3
8,2
39
8,2
39
3
3
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 2017
139
SECTION K: OTHER LIABILITIES
K1 Provisions and other liabilities
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
K2 Contingent liabilities and undrawn facilities
Guarantees on behalf of clients
Letters of credit and discounting transactions
Irrevocable unutilised facilities and other
2017
Rm
10 611
182
2 436
818
14 047
754
321
(257)
818
2016
Rm
9 504
224
2 235
754
12 717
675
1 966
(1 887)
754
2017
Rm
26 710
2 837
101 336
2016
Rm
22 177
3 360
101 566
130 883
127 103
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.
140
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
There are a number of legal or potential claims against Nedbank Limited and its subsidiary companies, the outcomes of which
cannot at present be foreseen.
The largest potential claim relates to Pinnacle Point Group Limited, where Absa Bank Limited (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 Proprietary Limited 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 legal counsel is of the view that Nedbank has a strong case to resist both matters successfully.
K3 Commitments
New standards and interpretations not yet adopted
IFRS 16: Leases
IFRS 16 was issued in January 2016 and 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 or 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 and which transitional approach it will follow.
K3.1 Capital expenditure approved by directors
Contracted
Not yet contracted
2017
Rm
415
2 320
2 735
2016
Rm
515
2 092
2 607
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:
2017
Land and buildings¹
Furniture and equipment
2016
Land and buildings¹
Furniture and equipment
2018
Rm
919
20
939
2017
Rm
913
177
1 090
2019
– 2023
Rm
1 863
1 863
2018
– 2022
Rm
1 924
66
1 990
Beyond
2023
Rm
367
367
Beyond
2022
Rm
578
59
637
¹ The group may from time to time enter into subleases of properties where it is the lessee. These subleases are considered to be immaterial in the context of
the group’s overall leasing arrangements.
The terms of renewal and escalation clauses are as follows:
The majority of material leases entered into by the group include an option to renew the lease. If the rental for the renewal
period has not been agreed on or determined by the commencement date of the renewal period, the tenant must continue to
pay the existing monthly rental. Once the rental is determined, cumulative adjustments will be made to the amount payable
for the following month. Escalation clauses for major leases entered into by the group range between 6% and 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).
Nedbank Limited – Annual Report 2017
141
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 procedures include, but are not limited to, credit risk, liquidity risk, interest rate risk in the
banking book and market risk. Additional information relating to the group’s risk management policies and procedures are
disclosed in the unaudited Risk and Capital Management Report, available at nedbank.co.za.
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 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.
L2 Liquidity gap
Banks are inherently susceptible to liquidity mismatches and consequently funding and market liquidity risks. Through the
robust Liquidity Risk Management Framework the group manages the funding and market liquidity risk to ensure that banking
operations continue uninterrupted under normal and stressed conditions. The key objectives that underpin the Liquidity Risk
Management Framework include maintaining financial market confidence at all times, protecting key stakeholder interests
and meeting regulatory liquidity requirements.
In terms of measuring, managing and mitigating liquidity mismatches, Nedbank focuses on two types of liquidity risk: funding
liquidity risk and market liquidity risk. Funding liquidity risk is the risk that the group is unable to meet its payment obligations
as they fall due. These payment obligations could emanate from depositor withdrawals, the inability to roll over maturing debt
or meet contractual commitments to lend.
Liquidity risk management is a vital risk management function in all entities across all jurisdictions and currencies, and is a key
focus for the group.
The board of directors retains ultimate responsibility for the effective management of liquidity risk. Through the Group Risk
and Capital Management Committee (GRCMC) (a board committee), the board has delegated its responsibility for the
management of liquidity risk to Group ALCO.
The group’s Liquidity Risk Management Framework articulates the board-approved risk appetite in the form of limits and
guidelines, and sets out the responsibilities, processes, reporting and assurance required to support the management of
liquidity risk. The Liquidity Risk Management Framework is reviewed annually by Group Alco and approved by the GRCMC.
2017
Rm
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Non-
determined
Total
Cash and cash equivalents
(including mandatory reserve
deposits with central banks)
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
26 968
26 843
6 037
170
158 086
21 442
2 842
3 502
36 985
20 763
3 787
3 309
49 157
4 424
7 256
23 108
253 941
10 776
18 660
191 468
26 968
73 472
30 698
48 749
689 637
34 437
34 437
218 104
64 771
77 016
288 729
220 904
34 437
903 961
5 102
536 489
2 335
72 715
3 269
62 732
5 490
56 988
7 365
7 828
477
1 437
3 720
27 804
18 044
74 154
18 012
74 154
23 561
736 752
18 012
51 482
542 068
76 487
69 721
90 282
33 237
92 166
903 961
Net liquidity gap
(323 964)
(11 716)
7 295
198 447
187 667
(57 729)
–
142
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
2016
Rm
< 3 months
> 3 months
< 6 months
> 6 months
< 1 year
> 1 year
< 5 years
> 5 years
Non-
determined
Total
Cash and cash equivalents
(including mandatory reserve
deposits with central banks)
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Total equity
Derivative financial instruments
Amounts owed to depositors
Provisions and other liabilities
Long-term debt instruments
37 875
21 164
3 454
2 327
149 176
201
16 723
1 906
940
31 975
304
20 419
1 930
2 558
52 826
9 912
4 090
18 889
271 353
6 664
25 973
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
2 229
542 572
1 329
71 633
1 362
65 354
3 677
61 857
4 872
8 903
2 724
836
2 609
26 837
19 056
67 722
16 489
67 722
13 469
750 319
16 489
52 062
547 525
73 798
69 325
92 371
32 831
84 211
900 061
Net liquidity gap
(333 529)
(22 053)
8 712
211 873
186 401
(51 404)
–
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.
L3
Interest rate risk in the banking book
Net interest income sensitivity
1% instantaneous decline in interest rates1
2017
Rm
2016
Rm
(1 210)
(1 197)
Management of interest rate risk in the banking book
The group employs various analytical techniques to measure interest rate sensitivity monthly within the banking book on
both an earnings and economic value basis (where appropriate) for balance sheets with material exposure to interest rate
risk. Assets, liabilities and derivative financial instruments are modelled and reported based on their contractual repricing or
maturity characteristics. Where advances are exposed to prepayments and deposits to ambiguous repricing, Group ALCO
approves the use of prepayment models for the hedging of fixed-rate advances and behavioural repricing assumptions for the
modelling and reporting of ambiguous repricing deposits, where appropriate.
Sensitivity analysis
At the reporting date, the net interest income sensitivity of the banking book for a 1% parallel reduction in interest rates
measured over 12 months is a decrease in net interest income of approximately R1 210m before tax (2016: R1 197m), which is
within the board’s approved risk limit. The group’s net interest income sensitivity exhibits very little convexity and will therefore
also result in an increase in pretax net interest income of similar amounts should interest rates increase by 1%. Net interest
income sensitivity is actively managed through on- and off-balance-sheet interest rate risk management strategies for the
group’s expected interest rate view and impairment sensitivity.
1 Nedbank London: 0,5% instantaneous decline in interest rates.
L4 Historical value at risk (99%, one-day) by risk type
Value at risk (VaR) is the potential loss in pretax profit due to adverse market movements over a defined holding period
with a specified confidence level. The VaR methodology is a statistically defined, probability-based approach that takes into
account market volatilities as well as risk diversification by recognising offsetting positions and correlations between products
and markets. It facilitates the consistent measurement of risk across all markets and products, and risk measures can be
aggregated to arrive at a single risk number. The 99% one-day VaR number used by the group reflects, at a 99% confidence
level, that the daily loss will not exceed the reported VaR and therefore that the daily losses exceeding the VaR figure are likely
to occur, on average, once in every 100 business days.
The group uses one year of historical data to estimate VaR. Some of the considerations that are taken into account when
reviewing the VaR numbers are:
• The assumed one-day holding period will not fully capture the market risk of positions that cannot be liquidated or offset
with hedges within one day.
• The historical VaR assumes that the past is a good representation of the future, which may not always be the case.
• The 99% confidence level does not indicate the potential loss beyond this interval.
• If a product or listing is new in the market, limited historical data would be available. In such cases, a proxy is chosen to
act as an estimate for the historical rates of the relevant risk factor. Depending on the amount of (limited) historical rates
available, regression analysis is used on the chosen proxy to refine the link between the proxy and the actual rates.
Additional risk measures are used to monitor the individual trading desks, including performance triggers, approved trading
products, concentration of exposures, maximum tenor limits and market liquidity constraints.
Nedbank Limited – Annual Report 2017
143
L4 Historical value at risk (99%, one-day) by risk type (continued)
All market risk models are subject to periodic independent validation in terms of the Group Market Risk Management
Framework. A formal review of all existing valuation models is conducted at least annually. Should the review process indicate
that models need to be updated, a formal independent review will take place. All new risk models developed are independently
validated prior to implementation.
The group’s current trading activities are focused on liquid markets, which are in line with the current regulatory liquidity
horizon assumption of a 10-day holding period, as per Basel III.
2017
2016
Rm
Average
Minimum
Maximum
Year-end
Average Minimum
Maximum
Year-end
Foreign exchange
Interest rate
Credit
Commodity
Diversification
Total VaR exposure
4,5
21,2
9,2
0,1
(12,5)
22,5
0,9
11,3
6,2
<0.1
11,5
38,1
16,1
0,7
3,8
31,1
12,1
0,7
(20,5)
13,1
39,2
27,2
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
144
Nedbank Limited – Annual Report 2017
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)
Cash generated by operations
M2 Cash received from clients
Interest and similar income (note B5.1)
Commission and fees income (note B6)
Net trading income (note B6)
Private-equity (losses)/income
Other non-interest income
M3 Cash paid to clients, employees and suppliers
Interest expense and similar charges (note B5.2)
Staff costs (note B7)
Computer processing
Communication and travel
Occupation and accommodation
Marketing and public relations (note B7)
Fees and assurances (note B7)
Furniture, office equipment and consumables
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
2017
Rm
2016
Rm
14 817
13 243
1 319
777
4 238
(36)
210
858
1 181
784
5 411
(11)
289
810
22 183
21 707
71 311
14 890
3 426
(17)
862
69 862
14 587
3 321
690
743
90 472
89 203
(46 111)
(45 344)
(14 562)
(13 819)
(2 377)
(2 368)
(734)
(1 695)
(1 606)
(2 609)
(292)
(221)
(751)
(1 718)
(1 618)
(2 421)
(314)
(309)
(70 207)
(68 662)
(5 909)
1 808
(8 140)
(7 954)
(20 043)
(21 963)
(24 144)
(38 057)
827
(7 986)
(11 896)
5 488
18 572
4 115
25 686
8 886
3 596
(18 411)
5 005
23 872
Nedbank Limited – Annual Report 2017
145
M6 Disposal of investments in subsidiary companies net of cash
2017
Rm
2016
Rm
Other short-term securities
Derivative financial instruments
Government and other securities
Loans and advances
Other assets
Current taxation assets
Investments in associate companies and joint ventures
Deferred taxation assets
Property and equipment
Intergroup assets
Amounts owed to depositors
Deferred taxation liabilities
Derivative financial instruments
Current taxation liabilities
Other liabilities
Intergroup liabilities
Net assets disposed (excluding cash and cash equivalents)
Non-controlling interest
Dividends paid to ordinary shareholders
Cash and cash equivalents disposed
M7 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
492
20
130
4 756
68
15
3
31
116
1 586
(7 288)
(3)
(3)
(20)
(148)
(110)
(355)
(244)
(907)
(1 506)
–
–
387
817
(3 627)
(3 570)
69
116
(3 055)
(858)
(70)
(387)
(3 210)
(810)
(3 913)
(4 020)
146
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
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. The consolidated financial statements
are presented in SA rand, which is the group’s presentation currency.
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.
Exchange rates
UK pound to rand
US dollar to rand
Geographic analyses
Average
Closing
2017
17,15
13,31
2016
19,65
14,57
2017
16,60
12,29
2016
16,95
13,77
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.
Nedbank Limited – Annual Report 2017
147
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
R’000
Cash portion of package
Other benefits
Defined-contribution retirement fund
Guaranteed remuneration
Cash performance incentive
Cash performance incentive
(delivered in shares)
Total short-term incentive (STI)1
Total remuneration2
Value of share-based awards
(face value at award)3
Total direct remuneration
2017
7 014
160
1 001
8 175
7 875
5 875
13 750
21 925
14 500
36 425
2016
6 680
148
953
7 781
7 750
6 750
14 500
22 281
14 500
36 781
2017
4 635
149
668
5 452
4 500
3 500
8 000
13 452
2016
4 415
137
635
5 187
4 625
3 625
8 250
13 437
2017
4 184
110
576
4 870
4 625
3 625
8 250
13 120
2016
3 654
105
666
4 425
4 625
3 625
8 250
12 675
9 500
9 250
8 750
8 000
22 952
22 687
21 870
20 675
1
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 invested in the scheme for 36 months.
2 Total remuneration is the sum of guaranteed remuneration and total STI.
3 This is the value of the share-based awards made in the following financial year.
4 Ciko Thomas was appointed as a prescribed officer on 1 April 2016.
5 Awards for 2016 include on-appointment awards made in respect of appointment to more senior roles.
148
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
Iolanda Ruggiero
Ciko Thomas4, 5
Brian Kennedy
R’000
Cash portion of package
Other benefits
Defined-contribution retirement fund
Guaranteed remuneration
Cash performance incentive
Cash performance incentive
(delivered in shares)
Total short-term incentive (STI)1
Total remuneration2
Value of share-based awards
(face value at award)3
Total direct remuneration
2017
3 160
91
454
3 705
3 125
2 125
5 250
8 955
6 000
14 955
2016
3 011
84
432
3 527
3 550
2 550
6 100
9 627
6 500
16 127
2017
3 746
113
610
4 469
4 625
3 625
8 250
12 719
8 500
21 219
2016
2 513
78
410
3 001
4 250
3 250
7 500
10 501
12 000
22 501
2017
4 015
236
320
4 571
8 875
7 875
16 750
21 321
2016
3 819
233
305
4 357
9 320
8 320
17 640
21 997
8 500
8 500
29 821
30 497
1
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 invested in the scheme for 36 months.
2 Total remuneration is the sum of guaranteed remuneration and total STI.
3 This is the value of the share-based awards made in the following financial year.
4 Ciko Thomas was appointed as a prescribed officer on 1 April 2016.
5 Awards for 2016 include on-appointment awards made in respect of appointment to more senior roles.
Nedbank Limited – Annual Report 2017
149
N3.2 Non-executive directors’ remuneration
DK Adomakoh
TA Boardman
BA Dames
ID Gladman
E Kruger
PB Hanratty
JB Hemphill
PM Makwana
MA Matooane
NP Mnxasana
V Naidoo
JK Netshitenzhe
R Leith
SS Subramoney
MI Wyman
L Manzini
N Dongwana
H Brody
Total
Note
1,1a
2,2a,2b,2c
9
3,3a
10
9
9
4,4a
5,5a
6
7
8
Nedbank and Nedbank
Group board fees
Committee
fees
Total
2017
Total
2016
R’000
R’000
R’000
R’000
172
836
463
463
463
463
463
463
463
5 178
463
463
463
648
275
275
238
50
505
319
391
814
231
980
363
965
328
391
911
748
194
251
324
222
1 341
782
854
1 277
694
1 443
826
1 428
5 178
791
854
1 374
1 396
469
526
562
572
2 432
718
791
346
137
635
1 281
717
1 260
4 875
705
181
961
1 711
12 252
7 765
20 017
17 322
1 David Adomakoh resigned as a director of Nedbank Limited and Nedbank Group Limited on 18 May 2017.
1a David Adomakoh resigned as a member of the Group Transformation, Social and Ethics Committee and the Group Related-party Transactions
Committee on 18 May 2017.
2 Tom Boardman resigned as a director of Nedbank Limited and Nedbank Group Limited on 18 May 2017.
2a Tom Boardman resigned as member and Chairman of the Group Credit Committee, Large-exposure Approval Committee and Group Risk and Capital
Management Committee on 18 May 2017.
2b Tom Boardman resigned as a member of the Group Audit Committee, Group Directors’ Affairs Committee and Group Related-party Transactions
Committee on 18 May 2017.
2c Tom Boardman sat 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 £40 000. He resigned with effect from 20 March 2018.
3 Errol Kruger was appointed as the Chairman of the Group Credit Committee, Large-exposure Approval Committee and Group Risk and Capital
Management Committee on 18 May 2017.
3a Errol Kruger was appointed as a member of the Group Directors’ Affairs Committee on 18 May 2017.
4 Stanley Subramoney was appointed as the Chairman of the Group Audit Committee on 18 May 2017.
4a Stanley Subramoney was appointed as a member of the Group Directors’ Affairs Committee and the Group Related-party Transactions Committee on 18
May 2017.
5 Malcolm Wyman resigned as Chairman and member of the Group Audit Committee on 18 May 2017.
5a Malcolm Wyman resigned as a member of the Group Risk and Capital Management Committee on 18 May 2017.
6 Linda Manzini was appointed a director of Nedbank and Nedbank Group with effect from 1 June 2017, and was appointed as a member of the Group
Transformation, Social and Ethics Committee and Group Credit Committee also on 1 June 2017.
7 Neo Dongwana was appointed a director of Nedbank and Nedbank Group with effect from 1 June 2017, and was appointed as a member of the Group
Remuneration Committee and Group Audit Committee also on 1 June 2017.
8 Hubert Brody was appointed a director of Nedbank and Nedbank Group with effect from 1 July 2017, and was appointed a member of the Group Credit
Committee, Large-exposure Approval Committee, Group Audit Committee and Group Remuneration Committee also with effect from 1 July 2017.
9 Fees for Ian Gladman, Bruce Hemphill and Rob Leith were paid to Old Mutual plc.
10 Paul Hanratty resigned as a director of Nedbank Ltd and Nedbank Group Ltd and all the committees on 12 March 2016.
150
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors’ emoluments (continued)
N3.2 Non-executive directors’ remuneration (continued)
Number of shares
Tom Boardman1
Mike Brown
Rob Leith
Mantsika Matooane
Mantsika Matooane (Nedbank Limited preference shares)
Nomavuso Mnxasana
Raisibe Morathi
Vassi Naidoo
Mfundo Nkuhlu
Stanley Subramoney
Total ordinary shares
Total preference shares
1 Resigned/retired during 2017.
Beneficial
direct
2017
4 012
281 766
2 261
Beneficial
direct
2016
4 012
216 087
44
2 261
11 000
136 794
119 876
62 028
8 178
Beneficial
indirect
2017
10 988
262 255
Beneficial
indirect
2016
10 988
286 375
7 420
134 315
47 135
160 863
2 300
7 420
118 197
45 785
165 527
2 300
486 861
350 458
625 276
636 592
11 000
No change in the above interests occurred between 31 December 2017 and 1 March 2018.
Nedbank Limited – Annual Report 2017
151
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
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
shares/
options
lapsed
Market
price at
vesting
(R)
Value
gained on
vesting
(R)
value of
loss on
paid in
respect
Number of
restricted
lapsing5
of all plans6
(R)
(R)
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value
Notional
of dividends
62 200 06/03/2014
50 826 12/03/2015
70 851 17/03/2016
209,00 07/03/2017
255,77 13/03/2018
190,54 17/03/2019
16 141 31/03/2014
16 435 31/03/2015
22 563 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
Own shares 31/03/2014
Own shares 31/03/2015
Own shares 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
20 334 06/03/2014
209,00 07/03/2017
20 334 07/03/20142
45 939 12/03/2015
45 922 17/03/2016
209,00 08/03/2017
255,77 13/03/2018
190,54 17/03/2019
8 743 31/03/2014
8 511 31/03/2015
11 670 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
Own shares 01/04/2014
Own shares 31/03/2015
Own shares 31/03/2016
223,03 02/04/2017
251,29 01/04/2018
189,58 01/04/2019
33 492 06/03/2014
27 368 12/03/2015
39 361 17/03/2016
209,00 07/03/2017
255,77 13/03/2018
190,54 17/03/2019
7 936 31/03/2014
7 924 31/03/2015
10 892 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
Own shares 01/04/2014
Own shares 31/03/2015
Own shares 31/03/2016
223,03 02/04/2017
251,29 01/04/2018
189,58 01/04/2019
40 804
21 396
232,59
9 490 602
(4 976 496)
58 197 15/03/2017
249,15 16/03/2020
16 141 31/03/20143
232,59 01/04/2017
32 282
250,93
8 100 522
14 371 31/03/2017
258,33 01/04/2020
1 345 01/04/20173
232,59 01/04/2017
2 690
250,93
675 002
Own shares 31/03/2017
220,17 01/04/2020
18 266 126
(4 976 496)
3 411 061
3 411 061
13 340
20 334
6 994
232,59
3 102 751
(1 626 734)
232,59
4 729 485
37 126 15/03/2017
249,15 16/03/2020
8 743 31/03/20143
232,59 01/04/2017
17 486
250,93
4 387 762
7 717 31/03/2017
258,33 01/04/2020
1 345 01/04/20143
232,59 02/04/2017
2 690
250,93
675 002
Own shares 31/03/2017
220,17 01/04/2020
12 895 000
(1 626 734)
2 326 088
2 326 088
21 971
11 521
232,59
5 110 235
(2 679 669)
32 109 15/03/2017
249,15 16/03/2020
7 936 01/04/20173
223,03 01/04/2017
15 872
250,93
3 982 761
7 717 31/03/2017
258,33 01/04/2020
1 345 02/04/20173
232,59 02/04/2017
2 690
250,93
675 002
Own shares 31/03/2017
220,17 01/04/2020
9 767 998
(2 679 669)
1 851 417
1 851 417
50 826
70 851
31/12/2017
13/03/2018
31/12/2018
17/03/2019
58 197
31/03/2019
16/03/2020
16 435
31/12/2017 01/04/2018
22 563
31/12/2018 01/04/2019
14 371
31/12/2019 01/04/2020
45 939
45 922
37 126
31/12/2017
13/03/2018
31/12/2018
17/03/2019
31/12/2019
16/03/2020
8 511
31/12/2017 01/04/2018
11 670
31/12/2018 01/04/2019
7 717
31/12/2019 01/04/2020
39 361
32 109
31/12/2018
17/03/2019
31/12/2019
16/03/2020
10 892
31/12/2018 01/04/2018
7 717
31/12/2019 01/04/2020
Executive directors
MWT Brown
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
MC Nkuhlu
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
RK Morathi
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
152
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
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
lapsing5
(R)
Total value
of dividends
paid in
respect
of all plans6
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
16 141 31/03/2014
223,03 01/04/2017
16 141 31/03/20143
232,59 01/04/2017
32 282
250,93
8 100 522
Scheme4
Own shares 31/03/2014
223,03 01/04/2017
1 345 01/04/20173
232,59 01/04/2017
2 690
250,93
675 002
40 804
21 396
232,59
9 490 602
(4 976 496)
18 266 126
(4 976 496)
3 411 061
3 411 061
13 340
20 334
6 994
232,59
3 102 751
(1 626 734)
232,59
4 729 485
8 743 31/03/2014
223,03 01/04/2017
8 743 31/03/20143
232,59 01/04/2017
17 486
250,93
4 387 762
Scheme4
Own shares 01/04/2014
223,03 02/04/2017
1 345 01/04/20143
232,59 02/04/2017
2 690
250,93
675 002
12 895 000
(1 626 734)
2 326 088
2 326 088
21 971
11 521
232,59
5 110 235
(2 679 669)
7 936 31/03/2014
223,03 01/04/2017
7 936 01/04/20173
223,03 01/04/2017
15 872
250,93
3 982 761
Scheme4
Own shares 01/04/2014
223,03 02/04/2017
1 345 02/04/20173
232,59 02/04/2017
2 690
250,93
675 002
50 826
70 851
58 197
31/12/2017
31/12/2018
31/03/2019
13/03/2018
17/03/2019
16/03/2020
16 435
31/12/2017 01/04/2018
22 563
14 371
31/12/2018 01/04/2019
31/12/2019 01/04/2020
45 939
45 922
37 126
31/12/2017
31/12/2018
31/12/2019
13/03/2018
17/03/2019
16/03/2020
8 511
11 670
7 717
31/12/2017 01/04/2018
31/12/2018 01/04/2019
31/12/2019 01/04/2020
39 361
32 109
31/12/2018
31/12/2019
17/03/2019
16/03/2020
10 892
7 717
31/12/2018 01/04/2018
31/12/2019 01/04/2020
9 767 998
(2 679 669)
1 851 417
1 851 417
Nedbank Limited – Annual Report 2017
153
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
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
58 197 15/03/2017
249,15 16/03/2020
16 435 31/03/2015
251,29 01/04/2018
22 563 31/03/2016
189,58 01/04/2019
14 371 31/03/2017
258,33 01/04/2020
Own shares 31/03/2015
251,29 01/04/2018
Own shares 31/03/2016
189,58 01/04/2019
Own shares 31/03/2017
220,17 01/04/2020
20 334 06/03/2014
209,00 07/03/2017
20 334 07/03/20142
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
8 511 31/03/2015
251,29 01/04/2018
11 670 31/03/2016
189,58 01/04/2019
37 126 15/03/2017
249,15 16/03/2020
7 717 31/03/2017
258,33 01/04/2020
Own shares 31/03/2015
251,29 01/04/2018
Own shares 31/03/2016
189,58 01/04/2019
Own shares 31/03/2017
220,17 01/04/2020
33 492 06/03/2014
209,00 07/03/2017
27 368 12/03/2015
255,77 13/03/2018
39 361 17/03/2016
190,54 17/03/2019
32 109 15/03/2017
249,15 16/03/2020
7 924 31/03/2015
251,29 01/04/2018
10 892 31/03/2016
189,58 01/04/2019
7 717 31/03/2017
258,33 01/04/2020
Own shares 31/03/2015
251,29 01/04/2018
Own shares 31/03/2016
189,58 01/04/2019
Own shares 31/03/2017
220,17 01/04/2020
Executive directors
MWT Brown
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Total value of dividends
Total
MC Nkuhlu
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Total value of dividends
Total
RK Morathi
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Total value of dividends
Total
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
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
Number of
restricted
restricted
shares/
options
released
shares/
options
lapsed
Market
price at
vesting
(R)
Value
gained on
vesting
value of
loss on
paid in
respect
Number of
restricted
lapsing5
of all plans6
(R)
(R)
(R)
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value
Notional
of dividends
16 746 06/03/2014
16 746 07/03/20142
22 285 12/03/2015
14 857 13/03/2015
23 617 17/03/2016
15 744 18/03/2016
209,00 07/03/2017
209,00 08/03/2017
255,77 13/03/2018
255,77 14/03/2018
190,54 17/03/2019
190,54 18/03/2019
16 141 31/03/2014
17 609 31/03/2015
23 730 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
Own shares 01/04/2014
Own shares 31/03/2015
Own shares 31/03/2016
223,03 02/04/2017
251,29 01/04/2018
189,58 01/04/2019
10 287 06/03/2014
10 287 07/03/20142
10 204 12/03/2015
6 803 13/03/2015
14 957 17/03/2016
9 971 18/03/2016
14 169 11/08/2016
9 447 12/08/2016
209,00 07/03/2017
209,00 08/03/2017
255,77 13/03/2018
255,77 14/03/2018
190,54 17/03/2019
190,54 18/03/2019
211,87 11/08/2019
211,87 12/08/2019
10 986
16 746
5 760
232,59
232,59
2 555 234
3 894 952
(1 339 718)
20 469 15/03/2017
13 646 16/03/2017
249,15 16/03/2020
249,15 17/03/2020
16 141 01/04/20173
232,59 01/04/2017
32 282
250,93
8 100 522
17 713 31/03/2016
258,33 01/04/2020
1 345 01/04/20173
232,59 01/04/2017
2 690
250,93
675 002
Own shares 31/03/2017
220,17 01/04/2020
15 225 710
(1 339 718)
2 540 402
2 540 402
6 749
10 287
3 538
232,59
232,59
1 569 750
2 392 653
(822 903)
18 061 15/03/2017
12 040 16/03/2017
249,15 16/03/2020
249,15 17/03/2020
1 486 31/03/2015
4 564 31/03/2016
251,29 01/04/2018
189,58 01/04/2019
6 919 31/03/2017
258,33 01/04/2020
1 486
2 282
2 306
235,00
209,66
214,60
349 210
478 444
494 868
22 285
14 857
23 617
15 744
20 469
13 646
31/12/2017
13/03/2018
31/12/2017
14/03/2018
31/12/2018
17/03/2019
31/12/2018
18/03/2019
31/12/2019
16/03/2020
31/12/2019
17/03/2020
17 609
23 730
31/12/2016 01/04/2018
31/12/2017 01/04/2019
17 713
31/12/2018 01/04/2020
10 204
31/12/2017
13/03/2018
6 803
14 957
31/12/2017
14/03/2018
31/12/2018
17/03/2019
9 971
31/12/2018
18/03/2019
14 169
9 447
18 061
12 040
31/12/2018
11/08/2019
31/12/2018
12/08/2019
31/12/2019
16/03/2020
31/12/2019
17/03/2020
2 282
4 613
31/12/2017
01/10/2018
31/12/2018 01/04/2020
5 284 925
(822 903)
1 454 227
1 454 227
Prescribed officers
B Kennedy
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
C Thomas
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
154
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Number of
restricted
Vesting
date
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
lapsing5
(R)
Total value
of dividends
paid in
respect
of all plans6
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
10 986
16 746
5 760
232,59
232,59
2 555 234
3 894 952
(1 339 718)
16 141 31/03/2014
223,03 01/04/2017
16 141 01/04/20173
232,59 01/04/2017
32 282
250,93
8 100 522
Scheme4
Own shares 01/04/2014
223,03 02/04/2017
1 345 01/04/20173
232,59 01/04/2017
2 690
250,93
675 002
15 225 710
(1 339 718)
2 540 402
2 540 402
6 749
10 287
3 538
232,59
232,59
1 569 750
2 392 653
(822 903)
1 486 31/03/2015
251,29 01/04/2018
4 564 31/03/2016
189,58 01/04/2019
6 919 31/03/2017
258,33 01/04/2020
1 486
2 282
2 306
235,00
209,66
214,60
349 210
478 444
494 868
5 284 925
(822 903)
1 454 227
1 454 227
22 285
14 857
23 617
15 744
20 469
13 646
31/12/2017
31/12/2017
31/12/2018
31/12/2018
31/12/2019
31/12/2019
13/03/2018
14/03/2018
17/03/2019
18/03/2019
16/03/2020
17/03/2020
17 609
23 730
17 713
31/12/2016 01/04/2018
31/12/2017 01/04/2019
31/12/2018 01/04/2020
10 204
6 803
14 957
9 971
14 169
9 447
18 061
12 040
31/12/2017
31/12/2017
31/12/2018
31/12/2018
31/12/2018
31/12/2018
31/12/2019
31/12/2019
13/03/2018
14/03/2018
17/03/2019
18/03/2019
11/08/2019
12/08/2019
16/03/2020
17/03/2020
2 282
4 613
01/10/2018
31/12/2017
31/12/2018 01/04/2020
16 746 06/03/2014
209,00 07/03/2017
16 746 07/03/20142
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
20 469 15/03/2017
249,15 16/03/2020
13 646 16/03/2017
249,15 17/03/2020
17 609 31/03/2015
251,29 01/04/2018
23 730 31/03/2016
189,58 01/04/2019
17 713 31/03/2016
258,33 01/04/2020
Own shares 31/03/2015
251,29 01/04/2018
Own shares 31/03/2016
189,58 01/04/2019
Own shares 31/03/2017
220,17 01/04/2020
10 287 06/03/2014
209,00 07/03/2017
10 287 07/03/20142
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
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
211,87 11/08/2019
9 447 12/08/2016
211,87 12/08/2019
18 061 15/03/2017
249,15 16/03/2020
12 040 16/03/2017
249,15 17/03/2020
Prescribed officers
B Kennedy
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Total value of dividends
Total
C Thomas
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
Total value of dividends
Total
Nedbank Limited – Annual Report 2017
155
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
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
Number of
restricted
restricted
shares/
options
released
shares/
options
lapsed
Market
price at
vesting
(R)
Value
gained on
vesting
value of
loss on
paid in
respect
Number of
restricted
lapsing5
of all plans6
(R)
(R)
(R)
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
Total value
Notional
of dividends
4 186 06/03/2014
4 186 07/03/20142
4 457 12/03/2015
2 971 13/03/2015
7 959 12/08/2015
5 306 13/08/2015
18 893 17/03/2016
12 595 18/03/2016
209,00 07/03/2017
209,00 08/03/2017
255,77 13/03/2018
255,77 14/03/2018
263,84 13/08/2018
263,84 14/08/2018
190,54 17/03/2019
190,54 18/03/2019
3 093 31/03/2014
3 110 31/03/2015
7 780 31/03/2016
223,03 01/04/2017
251,29 01/04/2018
189,58 01/04/2019
2 747
4 186
1 439
232,59
232,59
638 925
973 622
(334 697)
15 653 15/03/2017
10 435 17/03/2017
249,15 16/03/2020
249,15 17/03/2020
3 093 01/04/20173
232,59 01/04/2017
250,93
1 552 253
5 429 31/03/2017
258,33 01/04/2020
250,93
634 853
6 186
2 530
4 457
2 971
7 959
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
15 653
31/12/2018
18/03/2019
31/12/2019
16/03/2020
10 435
31/12/2019
17/03/2020
3 110
7 780
5 429
31/12/2017 01/04/2018
31/12/2018 01/04/2019
31/12/2019 01/04/2020
Own shares 01/04/2014
Own shares 31/03/2015
Own shares 31/03/2016
223,03 02/04/2017
251,29 01/04/2018
189,58 01/04/2019
1 265 01/04/20173
232,59 01/04/2017
Own shares 31/03/2017
220,17 01/04/2020
3 799 653
(334 697)
1 312 938
1 312 938
Prescribed officers
I Ruggiero
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Scheme4
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, 100% matching occurs,
otherwise a 50% matching occurs.
2 Restricted-share awards with time-based vesting only.
3 Match occurred at one share for each share in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme at the vesting date.
4
For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares in the scheme. After three years, if the CPTs are met, a 100%
matching occurs, otherwise a 50% matching occurs.
5 Value determined based on the number of shares lapsing, multiplied by the market share price on the scheduled vesting date.
6 Plans exclude the Voluntary Bonus Share Scheme, which consists of own shares.
156
Nedbank Limited – Annual Report 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
N3 Directors’ emoluments (continued)
N3.3 Share-based payments to executive directors and prescribed officers (continued)
Opening balance at 1 January 2017
Awards made during 2017
Awards vesting/lapsing during 2017
Dividends
Closing balance at 31 December 2017
Number of
restricted
shares/
options
Date of
issue/
inception
Issue
price
(R)
Number of
restricted
Vesting
date
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
lapsing5
(R)
Total value
of dividends
paid in
respect
of all plans6
(R)
Number of
restricted
shares/
options
End of
perfor-
mance
period
Final
vesting/
exercise
date
2 747
4 186
1 439
232,59
232,59
638 925
973 622
(334 697)
15 653 15/03/2017
249,15 16/03/2020
10 435 17/03/2017
249,15 17/03/2020
3 093 31/03/2014
223,03 01/04/2017
3 093 01/04/20173
232,59 01/04/2017
3 110 31/03/2015
251,29 01/04/2018
7 780 31/03/2016
189,58 01/04/2019
5 429 31/03/2017
258,33 01/04/2020
6 186
2 530
250,93
1 552 253
250,93
634 853
4 457
2 971
7 959
5 306
18 893
12 595
15 653
10 435
31/12/2017
31/12/2017
31/12/2017
31/12/2017
31/12/2018
31/12/2018
31/12/2019
31/12/2019
13/03/2018
14/03/2018
13/08/2018
14/08/2018
17/03/2019
18/03/2019
16/03/2020
17/03/2020
3 110
7 780
5 429
31/12/2017 01/04/2018
31/12/2018 01/04/2019
31/12/2019 01/04/2020
3 799 653
(334 697)
1 312 938
1 312 938
4 186 06/03/2014
209,00 07/03/2017
4 186 07/03/20142
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
Prescribed officers
I Ruggiero
Nedbank restricted
shares
Compulsory Bonus
Share Scheme1
Voluntary Bonus Share
Total value of dividends
Total
Scheme4
Own shares 01/04/2014
223,03 02/04/2017
1 265 01/04/20173
232,59 01/04/2017
Own shares 31/03/2015
251,29 01/04/2018
Own shares 31/03/2016
189,58 01/04/2019
Own shares 31/03/2017
220,17 01/04/2020
1 Matching on the Compulsory Bonus Share Scheme occurs only on shares in the scheme at the vesting date. If CPTs are met, 100% matching occurs,
otherwise a 50% matching occurs.
2 Restricted-share awards with time-based vesting only.
3 Match occurred at one share for each share in the Compulsory Bonus Share Scheme and Voluntary Bonus Share Scheme at the vesting date.
4
For the Voluntary Bonus Share Scheme employees invest their own Nedbank shares in the scheme. After three years, if the CPTs are met, a 100%
matching occurs, otherwise a 50% matching occurs.
5 Value determined based on the number of shares lapsing, multiplied by the market share price on the scheduled vesting date.
6 Plans exclude the Voluntary Bonus Share Scheme, which consists of own shares.
Nedbank Limited – Annual Report 2017
157
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
Old Mutual Life Assurance Company (SA) Limited and
associates
Nedbank Group Limited and associates
Public shareholders
Total
Number of
shareholdings
16
6
10
6 172
6 188
Beneficial shareholders holding 5% or more
Nedbank Group Limited
Prescient
Total
Major managers
Prescient Investment Management (SA)
Nedbank Group Limited
Nedgroup Private Wealth Proprietary Limited (SA)
Sanlam Investment Management (SA)
Investec Securities Proprietary Limited
Grindrod Asset Management (SA)
Abax Investments (SA)
Outsurance Insurance Company Limited (SA)
PSG Konsult (SA)
STANLIB Asset Management
Regent Insurance Company Limited (SA)
Ashburton Investments
BJM Private Client Services Limited (SA)
Sasfin Asset Managers Proprietary Limited
Graaff Baronetcy Fund (SA)
158
Nedbank Limited – Annual Report 2017
29 December 2017
1 000 000 000 shares
358 277 491 shares
Number of
shareholdings
256
2 574
2 911
412
35
6 188
%
4,14
41,60
47,04
6,66
0,56
Number
of shares
111 777
14 288 815
94 778 962
96 611 132
152 486 805
%
0,03
3,99
26,45
26,97
42,56
100,00
358 277 491
100,00
Number of
shareholdings
%
Number
of shares
6
69
70
4 055
25
6
3
85
1 578
42
208
5
1
35
6 188
0,10
1,12
1,13
65,53
0,40
0,10
0,05
1,37
25,50
0,68
3,36
0,08
0,02
0,56
326 710
6 263 062
9 927 451
92 054 522
26 677 659
12 568 540
757 322
72 932 451
66 834 334
2 191 008
21 100 449
2 323 800
37 300 000
7 020 183
%
0,09
1,75
2,77
25,69
7,45
3,51
0,21
20,36
18,65
0,61
5,89
0,65
10,41
1,96
100,00
358 277 491
100,00
%
Number
of shares
0,26
52 031 449
0,10
0,16
173 476
51 857 973
99,74
306 246 042
%
14,52
0,05
14,47
85,48
100,00
358 277 491
100,00
Number
of shares
51 857 973
30 855 879
82 713 852
%
14,47
8,61
23,08
Number of
shares
Dec 2017
% holding
Dec 2016
% holding
41 714 265
37 300 000
35 752 365
22 251 908
18 502 595
11 795 843
9 639 792
7 586 720
5 343 194
4 957 866
4 848 485
4 211 909
4 025 598
3 864 691
3 281 296
11,64
10,41
9,98
6,21
5,16
3,29
2,69
2,12
1,49
1,38
1,35
1,18
1,12
1,08
0,92
8,92
10,41
10,04
6,12
4,13
3,56
2,56
2,12
1,51
1,78
1,35
1,40
1,10
1,10
0,92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December
COMPLIANCE WITH IFRS – FINANCIAL STATEMENT NOTES
Note
number
Note description
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
I6
J
K1
K2
K3
L1
L2
L3
L4
M
N1
N2
N4
Principal accounting policies
Key assumptions concerning the future and key sources of
estimation
Standards issued but not yet effective
Segmental reporting
Dividends
Share capital
Additional tier 1 capital instruments
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
Credit analysis of other short-term securities, and
government and other securities
Cash and cash equivalents
Derivative financial instruments
Amounts owed to depositors
Long-term debt instruments
Contractual maturity analysis for financial liabilities
Managed funds
Investment securities
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
Property and equipment
Intangible assets
Long-term employee benefits
Non-current assets and liabilities held for sale
Other assets
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
Share-based payments
Provisions and other liabilities
Contingent liabilities and undrawn facilities
Commitments
Capital management
Liquidity gap
Interest rate risk in the banking book
Historical value at risk (99%, one-day) by risk type
Cashflow information
Foreign currency conversion
Events after the reporting period
Preference shareholders’ analysis
IFRS required
IAS 1
IAS 1
IAS 8
IFRS 8
IAS 1, IAS 10, and IAS 32
IAS 1 and IAS 32
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 18, IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 18, IAS 20, IAS 32, IAS 39, IFRS 4, IFRS 7, IFRS 8
and IFRS 13
IAS 1, IAS 19, IFRS 2 and IFRS 8
IAS 1
IAS 12
IAS 12
IAS 1, IAS 16 and IAS 36
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
IFRS 7
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
IFRS 7
IAS 1, IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 28, IFRS 11, IFRS 12 and IFRS 13
IAS 27, IFRS 10 and IFRS 12
IFRS 12
IAS 39, IFRS 7, IFRS 12 and IFRS 13
IAS 24
IAS 16, IAS 36 and IFRS 13
IAS 38 and IAS 36
IAS 19 and IFRIC 14
IFRS 5 and IFRS 13
IAS 1, IAS 39, IFRS 7 and IFRS 13
IAS 39 and IFRS 7
IAS 39, IFRS 7 and IFRS 13
IAS 39, IFRS 7 and IFRS 13
IAS 32, IAS 39, IFRS 7 and IFRS 13
IFRS 7 and IAS 32
IFRS 7
IFRS 2
IAS 37, IAS 32, IAS 39, IFRS 7 and IFRS 13
IAS 37 and IAS 10
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
Nedbank Limited – Annual Report 2017
159
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160
Nedbank Limited – Annual Report 2017
Terms and conditions apply. Nedbank Ltd Reg No 1951/000009/06.
Authorised financial services and registered credit provider (NCRCP16).
19534 Intergrated Report - Emma A4.indd 1
2018/02/22 3:52 PM
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) for the year ended 31 December