 |
Overview
Nedbank Capital comprises the group’s investment banking services that together manage the structuring, lending and underwriting activities and all trading and broking activities in the equity, capital, interest rate, commodity and foreign exchange and derivative markets.With a full product spectrum and collaborative interaction with all the group business areas Nedbank Capital is able to compete effectively in all our target markets.
Nedbank Capital’s product spectrum stretches from equity research to the provision of long-term project financing, allowing us to provide tailored solutions to all client needs.
Strategy
- Nedbank Capital’s key differentiator is the sector expertise used in developing multidisciplinary solutions, which requires cooperation between different product areas.
- An integrated investment bank necessitates creating a culture of collaboration, which itself enables cross-pollination of ideas and aids origination.
- Collaboration ensures optimal information flow, shared deal opportunities and creating the maximum value for our clients.
- Optimise scarce resources, including liquidity and capital, away from traditional activity. Success will be driven by the ability to sell solutions rather than products.
- Link sector-focused teams with product expertise.
- Link new business opportunities to regulatory and market trends – in this case metals, hedging, trading, credit and portfolio management, syndication and export credit.
- Optimise different funding sources to enable steady liquidity.
- Implement a boutique international strategy where Nedbank Capital has sector expertise – mostly in the region, but in the case of resources internationally driven off the London platform.
- Establish an origination presence (representative office) in selected African jurisdictions to market new- product opportunities in equity and debt markets. This will be enhanced with the Ecobank alliance.
- Utilise the new Wall Street Programme to complete the system scalability initiative (in forex and money market products).
- Continue to focus on skills development, attraction and retention of highly specialised staff.
- Focus on economic profit (EP) growth, including enhanced flow trading in the domestic market and international markets.
Review of the year
Nedbank Capital has a diversified portfolio of businesses that enabled Nedbank Capital to weather the storm while global markets threw our industry into turmoil. Treasury and Investment Banking achieved excellent growth at 237% and 19% respectively. Trading activities within the Global Markets business, contributing 47% of total headline earnings, contracted 23% year-on-year in difficult circumstances specifically for our equity business.Recessionary pressure on our client base resulted in our impairment ratio increasing to 0,26% (2008: 0,06%) on average advances.As the impact of the global credit crunch lessened its grip on economies, credit spreads returned to normalised levels with resultant benefits in revaluations. Our equity business continued to recover from reduced volumes and market levels, as we started to rebuild portfolio and book size in a business we had consciously compressed in October 2008.
As South Africa positions itself for the pre- and postbenefits of hosting the 2010 FIFA World Cup, the positive impact of longer-term project financing opportunities is evident both within the current year and potential future pipeline.
Nedbank Capital offers a full suite of products and services from our branch in London, covering Africa and significant European geographies. Geographically London contributed 7% of total headline earnings, which equates to R170 million more than in 2008.
Financial review
Nedbank Capital performed well in volatile markets and achieved growth in headline earnings of 6,6% to R1 349 million. Return on risk-adjusted capital (RORAC) increased to 45,3% and economic profit (EP) increased by 18,6% to R955 million.The interest margin benefited from enhanced credit spreads as a result of a focus on EP and deal optimisation that also contributed to non-interest revenue (NIR) growth of 25,4%. This growth in NIR was supported by market volatility, narrowing of credit spreads and increased client flow that lifted trading revenue. Sound investments in the private equity portfolio, together with investment banking fee income, accounted for the remainder of the growth. Adverse markets were mitigated by active risk management, which resulted in a credit loss ratio of 26 basis points.
Treasury experienced exceptionally strong growth and capitalised well on the reduction in interest rates. Despite delays and cancellations of client projects, numerous new opportunities were originated, enabling Investment Banking to achieve good growth. Global Markets continued to develop the client franchise and generate income within acceptable risk parameters.
Ongoing investment in people, risk processes and systems has allowed management to focus on steadily growing diversified earnings streams within a prudent risk appetite.
The cluster increased its visibility winning a number of key industry awards, including Deal of the Year (African Banker) for the Bakwena deal and ICT/Telecoms Deal of the Year (Africa Investor) for the Neotel deal.
Prospects
Nedbank Capital’s results are highly dependent on levels of corporate activity and prospects, as well as volatility in foreign exchange and interest rates and levels of commodity prices and equity markets.With available liquidity, a full-spectrum service offering, and highly skilled staff, Nedbank Capital remains well-positioned to participate in corporate and public sector activity in the region.
While the business employs a broad and diversified set of risk-monitoring and risk-mitigating techniques, these systems and their application cannot anticipate every financial outcome or the timing thereof.
The global economic crisis had a negative impact on the performance of Nedbank Capital and the likelihood of higher impairment levels realised. However, this is not expected to continue into the immediate future.
Each business in Nedbank Capital has clear strategies and plans to take the business forward and contribute to the development of the region. The leadership team remains vigilant and ready to respond to the challenges ahead.
Our business
Nedbank Capital seeks to provide seamless specialist advice, debt and equity raising and execution, and trading capabilities in all the major SA business sectors. Principal clients include the top 200 domestic corporates, parastatals, leading financial institutions, non-SA multinational corporates and clients undertaking major infrastructure and mining projects in Africa, as well as emerging BEE consortiums.Global Markets: Equity Trading, the equity derivatives operation, provides hedging and structuring services to corporate, institutional and retail clients. This division exploits the synergies between trading and structuring equities, and facilitates BEE transactions. The division also offers a prime broking service.
Global Markets: Fixed Income, Currency and Commodities and Foreign Exchange focuses on providing the bank’s client base with currency, interest rate derivative and bond-related products as well as proprietary trading in the various markets.
Global Markets: Equity Broking, through the legal entity NedGroup Securities (Pty) Limited, is the institutional equity business of the group. It provides research, sales and trading services to major institutions.
Investment Banking includes the group’s advisory and specialised finance businesses. The advisory business includes corporate finance, private-equity and coverage teams. The specialised finance business provides debt-financing solutions with a portfolio of services, including project finance, leveraged debt, acquisition finance, structured trade, securitisation and commodity finance and structured financial solutions. The division also has several sectoral specialist teams that serve as Nedbank Capital’s knowledge hub in energy, infrastructure, and mining and resources. In addition, the division covers retail, healthcare and diversified industrials.
Treasury is the group’s funding interface with financial and investment markets, locally and internationally. All the group’s local and foreign currency funding requirements are executed and managed through this unit. Treasury also manages credit derivatives, the asset-backed conduit and bond origination businesses, and provides interest rate solutions.
| This page was updated on 30 March, 2010 |  Return to top |
