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Overview
Imperial Bank Limited (Imperial Bank or the bank), was incorporated into Nedbank Group in 1996 and is primarily engaged in asset-based financing. Nedbank Limited (Nedbank) and Imperial Holdings Limited (Imperial Holdings) respectively hold 50,1% and 49,9% of the ordinary share capital. In terms of a memorandum of understanding signed by the shareholders in 2001, Nedbank provides the funding for the bank, as well as risk management support, and Imperial Holdings provides the bank with access to its extensive South African footprint. A new shareholders’ agreement has been concluded by Nedbank and Imperial Holdings, which will come into effect on 1 January 2011 when the current agreement ends. The new agreement is for an indefinite period.The bank has four operating divisions. Motor Finance is the largest division comprising 62,7% of group loans and advances, followed by Property Finance with 17,9%, Professional Finance (formerly Medical Finance) with 11,1% and Supplier Asset Finance with 8,3%.
Review of the year
The year 2008 was extremely challenging and was characterised by high interest rates and high food, electricity and oil prices, as well as a rapidly deteriorating world economy and slowing domestic economy in the final quarter. Under these circumstances the bank produced a net profit after tax of R361,2 million, down 24,6% from the R479,2 million in the previous year. Nedbank’s share of net profit decreased from R227 million to R166 million. Return on equity (ROE) declined from 23,9% to 13,2%. The efficiency ratio, however, improved from 30,2% to 28,8%. Loans and advances grew from R35,3 billion to R44,7 billion as the bank continued to attract good-quality new business.Motor Finance had a testing year. Although loans and advances grew 29,0% from R21,7 billion to R28,0 billion, impairment losses on loans and advances increased 63,7% and represent 2,5% of average gross loans and advances compared with 1,9% in the previous year. The board confirmed through an indepth independent analysis that the Motor Finance business model remains sound in a tough market, evidenced by the efficiency ratio improving from 29,5% to 27,3% in the current year. Net profit after tax declined 35,0% from R206,8 million to R134,5 million. Motor Finance strengthened its position in its market.
Property Finance achieved good results, benefiting from a pipeline of business approved in the latter half of 2007. In line with the current strategy the commercial and industrial mortgage book grew 50,0% from R3,8 billion to R5,7 billion. Net profit after tax decreased 11,2% from R170,5 million to R151,4 million.
Supplier Asset Finance disposed of the debt collection business and repositioned itself to take advantage of financing equipment. Loans and advances growth of 37,0% and net profit after tax of R32,1 million were in line with forecasts.
Medical Finance, which changed its name to Professional Finance, had a disappointing year. Impairment losses on loans and advances increased from R3,8 million to R26,7 million and margins remained under pressure. The efficiency ratio, however, was well above target. During the past quarter the division commenced a restructuring initiative, which should improve the efficiency ratio and restore margins to levels required to achieve an acceptable return. Net profit after tax declined 33,2% from R19,6 million to R13,1 million.
The effective tax rate increased from 30,0% to 33,5% due to a change in the estimated liability for deferred tax in a subsidiary company.
No material events occurred after 31 December 2008 that might have had an impact on the group's reported financial position at this date.
Prospects
Recent months saw a dramatic change in the world economy. The speed and severity of the decline is unprecedented and has inevitably had a severe impact on the South African economy. Although interest rates are anticipated to decline through the year, bringing welcome relief to hard-pressed consumers, it is possible that the effects of retrenchments will overshadow the benefits of lower interest rates. Accordingly, trading conditions are likely to remain difficult and unpredictable.Motor Finance will focus on managing the growth of the book within the constraints of the market, while ensuring that risk-based pricing is further enhanced.
Property Finance will continue to focus on growing the book of commercial and industrial loans and advances, while selectively servicing the residential development market. Demand for property finance has significantly reduced and is unlikely to be restored during 2009.
Professional Finance will focus on improving margins and efficiencies and on maintaining a good-quality book, while expanding the market footprint to include other professions.
Supplier Asset Finance will focus on increasing its presence in the financing of equipment and assets related to infrastructural spend, while continuing to serve its traditional office equipment, trucking and aviation markets.
| This page was updated on 25 June, 2009 |  Return to top |
