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OVERVIEW
In August 2009 the new Group Executive Committee was announced with Mfundo Nkuhlu appointed to succeed Graham Dempster as Group Managing Executive: Nedbank Corporate, with Graham being appointed as Chief Operating Officer.Nedbank Corporate comprises the client- focused businesses of Corporate Banking, Property Finance, Nedbank Africa, the specialist operations of Transactional
Banking and Shared Services, as well as the support services in Risk Management, Human Resources, Finance and Strategy. These businesses provide mainly lending, deposit-taking and transactional banking execution services to wholesale banking clients.
Against the background of a difficult economic environment, Nedbank Corporate has had another strong showing with core banking businesses performing well. The cluster implements a strategy to manage for value by adopting selective lending practices, efficient utilisation of capital and enhancement of margins.
The risk management disciplines that have been implemented over the years have stood Nedbank Corporate in good stead. The proactive hands-on approach to risk management enabled Nedbank Corporate to achieve a credit loss ratio of 0,24%, which is on the low end of the through-the-cycle impairment range of 0,20% to 0,35%. However, in contrast to previous years when the property equity markets were buoyant, the results of the property investment business were less favourable due to lower property valuations.
Strategy
Nedbank Corporate’s core strength is providing a personalised relationship- based banking service to the wholesale market.This is attained by ensuring a thorough understanding of the needs of our clients and delivering appropriate banking solutions. Our teams of highly qualified, experienced professionals are dedicated to providing a worldclass service and highly satisfying experience to our clients.The business seeks to develop a full suite of banking products and financial services that enable us to offer business solutions with a unique client value proposition. In executing this strategy we seek to grow our economic profit (EP) on a sustainable basis.
Focus areas
In the past year Nedbank Corporate focused on managing and mitigating risk in the recessionary environment. In addition, we adopted principles of efficient capital utilisation, selective lending and pricing for risk to enhance EP.We continued to focus on client acquisition and retention initiatives by providing high-quality service and customised client solutions.On transforming the business we invested in creating a unique and empowering culture, underpinned by achieving diversity.
Review of the year
Nedbank Corporate has produced strong core banking earnings growth, with most business units showing growth in headline earnings.The property investment business has been down due to generally negative market conditions characterised by declining property valuations.Key to the performance of Nedbank Corporate is effective leadership, driven by personal mastery and team effectiveness. Progress is evidenced by a further improvement in the overall staff morale as reflected by a 4,4% increase in the mean of the Nedbank Staff Survey.The record level improvement that resulted in the entropy score of 10% in the Barrett Survey confirms that the attitudes and perceptions of our people, who are crucial to client service and ultimately market growth, are compatible with the values and culture of Nedbank Corporate.
Nedbank Corporate’s commitment to transformation is demonstrated by setting ambitious black economic empowerment financing and employment equity targets, and reviewing overall business strategies to adopt best-in-class practices.
The business is benefiting from the image and positioning of the Nedbank brand and continues to contribute to the strengthening of the brand equity through various media campaigns and solid financial performance.
Notwithstanding the economic slowdown, the wholesale-lending activity provided the opportunity to grow wholesale lending, assisted by the demand for financing capital projects.We have been able to increase the number of primary- banked transactional clients in line with our stated strategy. Corporate Banking recorded a net growth of 19 new primary- banked clients in 2009.
We continue to focus on building our public sector client base and have contributed to the financing needs of our public sector clients in support of key public infrastructural projects and businesses. A number of public sector institutions and municipalities were added to the list of existing public sector clients.
The electronic banking platform functionalities were successfully completed and Corporate Banking client migration onto the new platform has commenced.
Electronic banking volumes in the wholesale market continue to grow strongly, whereas a further decline in revenue and volumes from cheque processing occurred, in line with the market experience, as processing switches to electronic and card platforms.
Growth in average advances in Corporate Banking remained strong at 14,8%, with the mix of the book shifting towards long-term advances. The strong growth in net interest income (NII) of 21% is driven mainly by the improved credit margins on the similar-credit-quality book.
Non-interest revenue (NIR) grew in line with the strategy of focusing on increasing our primary-banker market share to deepen our transactional banking offering and cross-selling value proposition in Corporate Banking. Nedbank Corporate achieved modest NIR growth in the recessionary economic environment, which had a negative impact on volume growth and fees from property investment.
Property Finance adopted an approach of selective asset creation, with an emphasis on creating high-quality advances at attractive margins. Average advances grew by 17,4%. The emphasis was on tight risk management within the deteriorating property market environment. The property investment portfolio experienced a challenging year with property valuations under pressure.
Transactional Banking provided the drive for investment in transactional banking products in line with the strategy to enhance Nedbank’s wholesale-banking product offering to clients with the implementation of the first phase of the letters-of-guarantee system and completion of the functions on the electronic banking platform.
Shared Services had another good year in delivering accurate and continuously improved efficient processing during volatile and uncertain global banking conditions. Nedbank Investor Services received the top rating as Crossborder and Domestic Custodian by Global Custodian for the third year running and was rated the Best Subcustodian Bank – Africa and South Africa by Global Finance for the second consecutive year.
Nedbank Africa has had a satisfactory performance, building on the investment in previous years in governance and risk management frameworks, information technology, employee skills and the streamlining of operations.
The group continues to make good progress with its alliance with the Pan- African banking group Ecobank. During the year the group launched various banking initiatives aimed at providing clients with a seamless one-bank experience. This included the implementation of systems to enable the opening of accounts across the 33-country footprint as well as the ability to access both Ecobank and Nedbank accounts through a single view. Local knowledge centres were established in major country hubs in East,West, Central and South Africa to provide local information on selected sectors and countries to support clients in growing and expanding their businesses across the African continent.
Financial review
Nedbank Corporate’s headline earnings decreased by 1,9% to R1 534 million and a return on risk-adjusted capital of 29,1% was achieved. EP grew by 11,6% to R836 million, driven by optimising and reducing capital. Core banking headline earnings, excluding property investing activities, increased by 7,8% and, after aligning for the allocated economic capital change to reflect like-on-like core earnings, increased by 16,2%. EP of the core banking business was up an excellent 35,8%, which demonstrates the strength of the cluster.The cluster implemented its selective growth strategies, focusing on high- EP business and prudently managing related risks. Impairments were well- managed with Corporate Banking and Nedbank Africa holding up well, while Property Finance saw an increase to more normalised levels from the low charge in 2008. Total expense growth was successfully managed within income growth levels.
NII and NIR on the core banking business grew 9,2% and 18,5% respectively. This growth was driven by improved credit margins, maintaining the quality of the book, modest volume increases in transactional banking products and gains in primary banking clients in both the public and private sectors. Property Finance had a 22,6% contraction in NIR, impacted by declining property valuations in the unlisted-property investment portfolio. Average advances increased by 15,2%, with growth from all key businesses.The credit loss ratio of 0,24% remained at the low end of the expected through-the- cycle range.
Corporate Banking had an excellent year with headline earnings up 25,3%, resulting from strong average asset growth, increased credit margins and good NIR growth across all sectors, supported by a number of primary-client gains.
Property Finance earnings declined 31,5% from the normalisation of its impairment charge, lower utilisation of capital and reduced property investment profits, which although lower than in 2008, exceeded expectations in the subdued market conditions. Property Finance released R730 million of economic capital as it refined its risk-weighted assets. On a like-for-like basis core property earnings were down 5,5%, which given the normalisation of credit loss ratios from unsustainably low levels, is a strong performance.
Nedbank Africa increased headline earnings by 24,5%, with solid performances from all the underlying businesses.
Prospects
The challenging global economic and financial environment is expected to continue in 2010 with reduced severity. The property market will remain subdued with growth anticipated to be modest. The public sector infrastructure investment programme is likely to proceed at a slower pace due to lower collection rates and higher deficit levels. The year 2010 is expected to be another challenging year and yet, compared with the previous year, is expected to present better prospects for Nedbank Corporate.Business and consumer confidence is likely to be enhanced by the 2010 FIFA World Cup prospects. Each business in Nedbank Corporate has reviewed and adapted its strategies and future plans to the prevailing economic and financial conditions. Nedbank Corporate is well- placed to grow and optimise business opportunities in the private and public sector markets by leveraging off its strong and valued client base and by providing innovative solutions through skilled teams. The dynamic leadership teams are well-positioned to respond to the challenges ahead.
Our business
Corporate Banking services companies with an annual turnover in excess of R400 million and generates business through lending, transactional banking, structuring and advisory fee income opportunities, significant wholesale funding, treasury execution, custodial services and global trade activities.Property Finance specialises in commercial and industrial property finance in the middle to large corporate market. The division also invests in property equities and in large property developments in partnership with selected clients.
Nedbank Africa has banking operations in Lesotho, Malawi, Namibia, and Zimbabwe. Nedbank Africa operates in the retail and wholesale banking segments in each country. The EcoBank alliance has brought about opportunities to provide Nedbank clients with extended reach and coverage in 28 additional countries across Africa.
Transactional Banking provides product development and support, and specialist transactional banking solutions and services to the bank’s clients, working closely with the relationship banking teams.
Corporate Shared Services provides transaction execution services for local and foreign payment and trade activities, client service centres and client onboarding project migration teams.
Nedbank Investor Services provides custodial services to entities trading JSE Limited and facilitates share-lending activities.
All these client-oriented businesses are ably supported by teams of Risk Management, Human Resources, Finance and Strategy.
Management team |
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| Graeme Auret (41) | Denys Denya (45) | Priya Naidoo (37) |
| Managing Executive: Corporate Banking | Managing Executive: Nedbank Africa | Executive Head: Finance |
| 7 years’ service • BCompt Dip Acc, CA (SA), | 12 years’ service • BAcc, CA (Zim), ACIS, MBA | 9 years’ service • BCom, BCom(Hons), |
| AMP (Insead Business School) | CA (SA) | |
| Adriaan du Plessis (50) | ||
| Frank Berkeley (53) | Executive Head: Transactional Banking | Murray Stocks (43) |
| Managing Executive: Property Finance | 19 years’ service • BCom(Hons), CTA, | Executive Head: Shared Services and |
| 15 years’ service • BCom, BAcc, CA (SA) | CA (SA), HDip(Co Law), CAIB (SA) | Nedbank Investor Services |
| 18 years’ service • BCom | ||
| Sam Bhembe (42) | Keith Hutchinson (51) | |
| Executive Head: Strategy, Marketing | Executive Head: Risk Management | |
| and Public Affairs | 20 years’ service • BCom, BCompt(Hons) | |
| 5 years’ service • BA(Paed); BA(Hons), P&DM, | ||
| MBA (Maastricht, Netherlands), Strategic | Shamelle Maharaj (38) | |
| Management in Banking (Insead Business | Executive Head: Human Resources | |
| School) | 13 years’ service • BA, P&DM | |
| This page was updated on 30 March, 2010 |  Return to top |
