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REVIEW OF 2008
Solid progress has been made over the past few years in rebuilding and repositioning Nedbank Retail.We now have a focused strategy, high-performing and motivated staff, a competitive product set, much-improved distribution, very competitive pricing structures and the most highly rated service levels in South Africa for two consecutive years.High interest rates, slowing volumes, declining house prices and low consumer confidence made 2008 a very challenging year in retail banking. Headline earnings have consequently decreased by 46,6% from R1 875 million to R1 002 million for the period to December 2008.
Net interest income (NII) grew by 11,0%, while non-interest revenue (NIR) was up 14,1%. As anticipated in this environment, Nedbank Retail’s credit loss ratio worsened to 2,47% (2007: 1,26%). This has been the main cause of the decline in return on risk-adjusted capital (RORAC) of 11,29% (2007: 22,09%). Expense growth has been controlled at 8,0%, which has led to an improved efficiency ratio of 61,09% (2007: 63,52%).
At Nedbank Retail our focus during 2008 has been firstly on managing through these more difficult times and secondly on making sure that we continue to improve the business across all aspects, so that, as markets normalise, we are in an even better position to compete. Our 2008 strategic initiatives were grouped under the categories of risk, sales and growth, service, enhanced productivity, distribution, transformation and our people.
Our biggest challenge in 2008 has been the credit risk environment. A number of mitigating actions have been taken to lessen the impact, including our ‘manage for value’ initiatives, scorecard and loan-to-value tightening, investment in all of our collections environments and application and collection process redesign.
We have made steady progress this year on growing our client base, particularly in the mass-market segment. During 2008 Nedbank attracted 590 000 (2007: 470 000, 2006: 276 000) new clients.We are growing our primary clients at about 10% a year, which we believe is above industry standards.We have maintained market share across all key product categories and also remain very well-positioned on product pricing.
We have seen significant progress in our journey to be worldclass at client service, both in our internal measure using the Client Management Assessment Tool (CMAT) framework, and also in external surveys.We again won the banking section of Ask Afrika’s poll of service excellence, the Orange Index, and have opened up a significant gap between our competitors and ourselves. The key remaining service issues continue to revolve around banking fees, communication (callbacks and replies) and turnaround times. AskOnce phase 2 was launched in July 2008 with a number of enhanced service promises, directly addressing communication and waiting times in branches.
In 2008 we embarked on a number of initiatives aimed at simplifying our client-facing processes in order to improve overall client experience and enhance productivity and execution via our channels. These projects included the redesign of our sales and service processes, ‘hassle-free fulfilment’, card electronic channels and vehicle finance operational process enhancements.
The year 2008 was the final year of the Nedbank Retail Threeyear Distribution Plan announced in 2006. Over the past three years Nedbank Retail has invested more than R1 billion in a range of channels, most notably automated teller machines (ATMs) and low-cost physical distribution points, which has led to a significant increase in our branded outlets. During the past year we installed 278 ATMs, 32 self-service terminals (SSTs) and enhanced our branch footprint by 22 additional Nedbank branches.We also further extended our reach into previously underserviced communities by growing our mobile sales operations to a total of 101 teams as well as opening 31 new personal-loan outlets. Cashback at point-of-sale (POS) functionality was introduced to an additional 1 621 POS devices, while the number of Nedbank-in-retailer outlets was grown to a total of 42. Continuous investment and expansion will be needed as we grow our client base.
In the second half of 2008 the decision was taken to integrate the Go Banking operation into Nedbank.While Go Banking has always been competitively priced and offered numerous benefits to its clients, it has been unable to grow its active client base of about 90 000 clients to a sustainable level. Go Banking was run as a separate business, in association with Pick n Pay, from 2002.While continuing to enjoy the same features and benefits to which they are accustomed, Go Banking clients now also enjoy access to the expanded Nedbank product range offered through our branch and other banking channels.
Transformation remains a key focus area for Nedbank Retail.We acknowledge that building a great place to work and a great place to bank requires a successful and sustainable transformation programme. During 2008 we rolled out a comprehensive transformation programme, including recruitment target setting, diversity workshops, transformation dialogue and entrenching our employment equity forums. Nedbank Retail has exceeded its targets in all categories and significant progress has been made in our employment equity plans.
We continue to make progress with staff morale and with building a differentiated culture. The Barrett framework is used to measure culture and we are delighted to see an increasing alignment between the Nedbank culture and our people’s view of the ideal culture. The feedback from the Nedbank staff survey also showed that Nedbank Retail had improved across all dimensions.
PROSPECTS AND STRATEGY
For 2009 we anticipate ongoing consumer pressure from relatively high interest rates, job losses and declining house prices. Although some recovery is expected in the unsecuredlending environment, impairments will remain high. Declining interest rates will negatively impact endowment income, but should provide some needed relief for distressed consumers.We expect slower growth across all of our major asset categories.We will continue to maintain our focus on managing through the current challenging economic cycle, with particular emphasis on:
- conservative credit policy and focus on collections and impairments;
- execution of ‘manage for value’ strategies in our securedlending products, with a strong focus on risk-based pricing and economic profit;
- investing in our businesses that contribute most to economic profit;
- focusing on bancassurance;
- continued focus on transformation;
- controlled distribution expansion;
- stringent expense control, with headcount broadly kept constant;
- entrenching our leading service position and rollout of the service culture;
- building our primary-client base through focused strategies in each segment and targeting our major channels on primary-client growth; and
- increasing our efforts to contribute to the national agenda, particularly in the Imbizo process and employment equity, and supporting black small businesses and low-income housing.
OUR BUSINESS
Nedbank Retail serves the financial needs of individuals and small businesses by providing transactional, card, lending, investment and insurance products and services. Nedbank Retail clients have been grouped into five primary client segments in order to tailor product and service solutions to their specific needs. These segments are the high-net-worth, affluent, middle, mass and small-business segments.Target markets are clearly defined, ranging from entry-level transactional banking to the high-net-worth segment. The Nedbank Retail cluster also services merchants and large corporates in respect of card-acquiring services. Our target markets are serviced through the brands within the Nedbank Retail stable, being Nedbank, Nedgroup Investments, BoE Private Clients, Fairbairn Private Bank and Fairbairn Trust Company.
Our retail product portfolio includes transactional accounts, home loans, vehicle and asset-based finance, card (both card-issuing and merchant-acquiring services), personal loans, bancassurance, investments and specialised products such as wills, stockbroking and portfolio advice. Nedbank Retail continues to build on our competitive product and price offerings while driving the delivery of a superior client service experience across all our client segments and channels.
The Nedbank Retail business operating model is organised around our product and client segment areas, overlaid by servicing and delivery channels. In addition three support services divisions underpin our business operating model.
The Retail Shared Services Division provides support, including human resources, finance, project office, strategic planning, credit lab and business intelligence services.
Retail Risk is responsible for the monitoring of compliance and risk as well as providing legal services to the cluster.
Retail Marketing provides marketing support to the business divisions and assists in coordinating marketing activities across the broader Nedbank Group.
| This page was updated on 25 June, 2009 |  Return to top |
