Nedbank Retail

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Target market and activities

Target markets are clearly defined, ranging from entry-level transactional banking to the high-networth 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, Go Banking, 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.

Our business

Nedbank Retail fulfils the financial services needs of individuals and small businesses through its offering of various transactional, card, lending, investment and insurance products. The clients that we serve are broadly grouped into five primary segments, namely the high-net-worth, affluent, middle, mass and small-business segments.

The Nedbank Retail business operating model is organised around our product and client segment areas, overlaid by servicing and delivery channels. Three support services divisions furthermore underpin our business operating model.

Client segments: private banking, consumer banking (includes the mass- and middle-market segments) and small-business services.

Products: cards, home loans, personal loans, bancassurance and wealth, vehicle and asset-based finance and transactional banking.

Shared Services provides support, including human resources, finance, projects, strategic planning and business intelligence services.

Retail Risk is responsible for the monitoring of compliance and all risks, including credit and operational risk, and for 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.

Review of 2007

The main focus of 2007 was the successful implementation of the 'growth' stage of our three-year strategy set in 2004.We anticipated a positive environment with reasonable market growth, notwithstanding the environment of higher interest rates. Our 2007 strategic initiatives were grouped under the categories of people, innovation, service, distribution, brand, risk, synergies, transformation growth and profits.

Efforts around our business culture and staff morale have been rewarding. There has been a positive shift in our organisational culture over the last few years following from the significant investments made to align personal and corporate values. 2007 has also seen a considerable increase in morale resulting from specific staff interventions.

Building on the success from 2006, Nedbank Retail has launched a number of innovative products and services during 2007, including the JustSave Savings Account, BoE transactional banking, the DreamMaker Guaranteed Investment product, Nedbank Greenbacks Credit Card, FutureSure Education Plan, online share trading, and mobile SMS banking. Our no-increase strategy during 2005 and the significant reductions in banking charges during 2006 and again in 2007 have worked together to realign Nedbank Retail pricing to the market. We now offer some of the most affordable banking packages in South Africa across the entrylevel, middle-market and high-net-worth client segments.

Nedbank Retail identified client service as one of our key differentiators. We launched our World-class Service Programme late in 2006, through which we achieved a step change in service excellence during 2007 with core initiatives, which included adopting the Client Management Assessment Tool (CMAT™) Framework and launching the AskOnce service promise. Results from our client satisfaction measures have started to show a steady improvement in service scores over most of our client segments. The key remaining service issues revolve around banking fees, communication (callback and replies) and turnaround times. Initiatives to address these are well underway and are being tracked continuously. A notable 2007 achievement was Nedbank being rated the top-service bank in South Africa by the independent Ask Afrika Orange Index.

The Nedbank Retail distribution strategy announced in August 2006 is progressing well. During the past year we installed 411 new ATMs and 71 SSTs. Our representation in previously underserviced communities was enhanced by the opening of 22 personal-loan kiosks and the rollout of 33 mobile sales teams. In total 25 new Nedbank branches were opened, half of which were in previously underserviced areas.

Nedbank Retail segmental report

FOR THE YEAR ENDED 31 DECEMBER


		Headline earnings		ROE		Efficiency ratio
		2007	2006	2007	2006	2007	2006
	% change	Rm	Rm	%	%	%	%
Home loans (1)	15	593	517	16	19	40,7	42,9
Bancassurance and wealth (2)	48	461	311	48	43	58,9	62,0

Banc&Wealth	67	422	252	82	76	57.9	62.5
International	(34)	39	59	9	15	61.5	60.6

Integrated segments (3)	46	446	306	32	26	55,9	59,5
Card	27	287	226	47	51	61,1	69,2
Personal loans	112	200	94	35	27	44,9	49,8
VAF and TIP (1)	25	179	143	27	24	83,4	84,3

Vehicle and asset finance (1)	20	(66)	(82)	(12)	(17)	96,9	110,3
Transactional and investment products (1)	9	245	225	195	203	81,7	81,9

Other (4)	17	(158)	(134)	(41)	(39)	<(100)	<(100)
Total	37	2 008	1 463	24,28	23,04	62,5	66,3

		Total advances		Average advances		Total deposits		Credit loss ratio
		2007	2006	2007	2006	2007	2006	2007	2006
	% change	Rm	Rm	Rm	Rm	Rm	Rm	%	%
Home loans (1)	28	77 442	60 585	69 730	51 638	7	118	0,23	0,18
Bancassurance and wealth (2)	15	13 537	11 741	12 478	9 363	14 990	13 514	0,50	(0,10)
Integrated segments (3)	20	23 820	19 805	22 109	18 499	27 580	23 522	1,06	1,23
Card	31	5 920	4 529	5 487	3 828	857	1 031	6,86	4,36
Personal loans	27	5 784	4 555	5 433	3 367	30	19	9,94	12,14
VAF and TIP (1)	20	7 060	5 900	6 602	6 038	43 906	38 622	3,13	2,69

Vehicle and asset finance (1)	22	6 071	4 977	5 347	4 923	-	-	1,75	1,90
Transactional and investment
products (1)	7	989	923	1 255	1 115	43 906	38 622	8,41	5,90

Other (4)	(49)	(71)	(139)	(89)	(102)	87	51	<(100)	<(100)
Total	25	133 492	106 976	121 750	92 631	87 457	76 877	1,26	1,10

(1) Excludes business written in integrated segments.
(2) Excludes revenues from Bancassurance in Nedbank Corporate and certain revenues in Card and Personal Loans. Includes BoE Private Clients.
(3) Includes Private Banking, Small Business Services, OMB and Go Banking.
(4) Comprises centralised costs per JV agreements, costs related to closed branches, cost of cash not yet transfer-priced and net impairment adjustments.

Continuous investment and expansion will be needed as we grow our client base. In 2007 a decision was taken to integrate Old Mutual Bank into Nedbank with a view to capitalising on the strengths of both businesses.

The benefits of this integration to clients, staff and the business as a whole are significant. Integrating the two banks will eliminate expensive duplication of branches and other infrastructure and reduce group costs. The improvement in our product offering to our clients will also be significant.

Historically Nedbank's marketing spend constituted approximately 13% to 15% of the total media spend of the big four banks; however, in 2006 our proportion of marketing spend doubled to 26%. This, combined with the repositioning of our brand to become a bank for all, has started to pay dividends in 2007 with significant improvements across major key brand image attributes. Measures have shown a considerable improvement in overall brand bonding, with the most noteworthy shifts across the middle- and mass-market segments.

Through the redesigning of our application processes, as well as the improvement of our collections procedures, we were able to close the substantial impairments ratio gap on our competitors. This was achieved in a worsening credit environment without compromising our growth objectives and is regarded as one of the major 2007 retail success stories. We also successfully implemented the National Credit Act, despite some challenges along the way.

The unlocking of synergies, such as better alignment of cross-group business objectives, usage of infrastructure and leveraging of cross-selling opportunities, has contributed to reaching our growth objectives. During 2007 Nedbank attracted 470 000 (2006: 276 000, 2005: 204 000) new clients. We are maintaining our efforts in both the acquisition and retention areas of our business, and expect further improvements in our net acquisition numbers for 2008.We were also able to grow our primary client base by 88 000 (2006: 53 000) net new clients. Further to this we have seen market share gains across most of our major product categories during 2007. The banking cross-sell ratio also improved slightly during the year.

Progress on achieving employment equity in terms of headcount targets has been good. The recently announced dti code targets are substantially more challenging, but are being addressed through key projects.

Despite the toughening economic environment, Nedbank Retail has exceeded its financial targets for the year. Net interest income grew by 24,57% and operating expenses by 20,95% on a comparable basis. This contributed to 37,25% growth in headline earnings from R1 463 million in 2006 to R2 008 million in 2007. Return on ordinary shareholders' equity improved from 23,04% to 24,28%, while the efficiency ratio showed further improvement from 66,3% to 62,5%. The effect of rising interest rates has become evident in the credit loss ratio of 1,26% (2006: 1,10%).

Prospects and strategy

We experienced a positive environment in 2007, with reasonable market growth notwithstanding the environment of higher interest rates. The retail environment for 2008 will be much tougher. We envisage an environment of continued high interest rates, slower loan growth, pressure on impairments and continued fee pressure.

Our strategy for 2008 builds on the strong foundation we have laid for growth in 2007.We have set ourselves an internal vision of becoming 'South Africa's fastest growing retail bank'.

Our overall strategic orientation in 2008 will be as follows:

Asset growth at or reasonably above projected market growth levels (ie generally maintaining market share, but with reasonable growth in some categories).
Strong focus on net interest revenue (NIR) and transactional numbers.
Conservative credit policy and focus on collections and impairments.
Implementing and maximising the synergies from the Old Mutual Bank integration.
Continued rollout of our distribution strategy.
Focus on transformation, including execution of the mass-market strategy.
Stringent expense control with headcount kept constant except for distribution expansion.


This page was updated on 7 October, 2008	Return to top