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The year 2010 was significant, with multifaceted business challenges and a tough economic climate in which continued high consumer indebtedness and muted business demand resulted in interest rates being decreased to their lowest in 36 years. Significant progress was made in bringing the Nedbank Retail and Nedbank Business Banking leadership and frontline teams closer together and understanding the strengths and opportunities for unlocking value creation and growth for Nedbank Group's clients and communities across South Africa.
Nedbank business banking
Nedbank Business Banking services medium-sized businesses with an average annual turnover of R7,5 million to R400 million. Typically these businesses tend to be family-owned and geographically dispersed.As such, Nedbank Business Banking operates through a wellentrenched, decentralised, accountable business service model, which uniquely positions the business to deliver personalised relationship banking based on local knowledge and a deep understanding of clients' businesses.
Client service teams, comprising sales, service and credit specialists, are located in offices around the country, ensuring quick responses to client requests and early identification of risks and service opportunities. The client service teams are supported by product specialists who facilitate more complex client needs, including specialist finance, invoice discounting, transactional banking, card acquiring and asset management.
nedbank retail
Nedbank Retail serves the financial needs of all individuals (excluding high-net-worth clients) and small businesses with a turnover of up to R7,5 million to whom it offers a full spectrum of banking and assurance products and services. The Nedbank Retail product portfolio includes transactional accounts, home loans, motor finance [including Motor Finance Corporation (MFC)], card (both card-issuingNedbank Business Banking
Strategy
The primary strategic thrust for Nedbank Business Banking is to continue its journey of business transformation and growth en route to becoming the leader in business banking for South Africa as measured across the key dimensions of staff, clients (including primary-banked market share) and financial performance. Emphasis is on the word 'for' South Africa, in recognition of the importance of Nedbank Business Banking's contribution towards enterprise development, job creation and community upliftment in the broader context of sustainable development.Over the six years to 2010 Nedbank Business Banking has delivered consistently high returns to shareholders (> 25%) and cumulative economic profit of R3 billion, while at the same time investing in the business in line with its strategic intent and strategy roadmap. This investment occurred into people leadership and diversity, the compelling holistic client offering with distinctive differentiators, organisational design, disciplined risk management capabilities, pricing tools, client value propositions for selected industries and overall market positioning.
Nedbank Retail Banking
Overview
Over the past 15 years Nedbank Group has not continuously invested in building a client franchise for the long term with a consistent, cohesive strategy aligned with demographic trends. This is evidenced by the low share of mass market clients (1,1 million versus the more than 4 million of competitors) and lower primarybanked client profile with, consequently, lower participation in this attractive economic profit pool.Nedbank Group is also behind other banks in client experience and infrastructure, which are the most important factors in a client's choice of bank. During the same period, however, Nedbank Retail strengthened its position in terms of client service, sustained and grew its presence in the personal loans, motor finance, cardacquiring and deposit businesses, and improved client service, and was able to increase its footprint by means of alternative outlets. The investment in people and culture is also an area of strength and source of distinctiveness for the business.
Strategy
A thorough strategic review of the market segments confirmed that retail is a growing market with another five million new entrants likely to enter the formal banking market in the next 10 years. It also showed that the middle class in South Africa is rising strongly, and the senior market remains attractive with another 1,4 million people entering this market in the next 10 years. The overall retail market economic profits are attractive and growing in the medium term.Taking into account the competitive landscape, technology trends, and its own internal context and core strengths, Nedbank Retail has defined its vision to 'understand clients' financial aspirations and provide clients with a choice of distinctive, client-centred banking experiences that strengthen the value of their relationship with Nedbank'. This aspiration is strongly underpinned by worldclass risk management practices.
Recognising the powerful 'virtuous circle' of the individual who becomes an entrepreneur, builds a business, and is then also an employer, means more of the client's banking activities can be captured as well as those of the client's employees due to interacting with the key influencer. The ease and simplicity of banking for the client will be enhanced by servicing the individual and business as one. In Nedbank Retail the influencers in households, their needs, and how they wish to be banked will all be considered – whether they are at an entry level or in a more affluent position – with offerings that service the needs of the client and can be easily concluded by the influencer, eg a pension plan for a domestic worker or first savings account for a child.
At the same time Nedbank Retail will leverage its existing strong product lines to have relevant bundled offerings that are integrated into the way clients wish to shop. This will mean offering a choice of opening hours and channels (ie branches, outlets, contact centres and mobile and online channels). In particular, Nedbank Retail will focus on extending its presence within attractive growth segments, namely youth, entry-level banking and small business, while rebuilding its historic strength in the middle market. The strong wholesale franchise will be harnessed to access employees of companies through a differentiated Nedbank@Work offering.
This strategy has been translated into a comprehensive blueprint plan, comprising 12 step change initiatives to be implemented over and above the 'business as usual' activities. These initiatives include developing distinctive value propositions with the entire organisation aligned to delivering these as well as repositioning the home loans business, winning in the cellphone sphere, capturing cost efficiencies and simplifying the information technology platforms and processes.
This is a shift from the previous product focus to a client-centred and integrated business with relevant offerings to distinctive markets. As a consequence of this new strategic direction, Nedbank Retail has been reorganised into four complementary line businesses, namely Consumer Banking, Retail Relationship Banking (a combination of small-business services and private banking), Card and Secured Lending, with strong shared functional lines of accountability, including risk, compliance, finance, strategy and technology. Nedbank Wealth will be the singular offering for highnet- worth clients.
The cohesive strategy and three fundamental imperatives of worldclass risk management practices; consistent investment in clients through their life stages; and strong alignment of product, channel and client insights to deliver a choice of distinctive, clientcentred experiences, should deliver the desired results.
Importantly, the fundamental, sustainable transformation of Nedbank Retail's client franchise is a medium- to long-term journey, requiring consistent, aligned execution of the identified strategic initiatives, while also seeking to deliver growth and a shareholder return above the cost of capital in four years based on the current economic outlook.
While it represents a significant opportunity, the sustainable turnaround of Nedbank Retail remains challenging in the short term, as R16,6 billion of Nedbank Group's capital is allocated to the cluster and in the five years to 2010 this cluster has generated R1,6 billion of cumulative economic losses. This is a challenging situation that will take time to overcome.
Imperial Bank integration
The Imperial Bank integration progressed well, with earnings, assets and liabilities transferred to Nedbank Group's clusters following section 54 approval in October 2010 and adjusted to reflect the group's economic capital and liquidity principles.Business continuity was maintained, which ensured 460 people retained their jobs through redeployment within the greater Nedbank Group. Performances by MFC, Supplier Asset Finance and Professional have been incorporated into the Nedbank Retail Cluster results, while Property has been included in Nedbank Corporate's results. The Imperial Bank MFC business was combined with the Nedbank Vehicle Asset Finance business and has been run as a holistic retail motor finance business for the whole of 2010. MFC, on a combined basis, performed strongly in 2010, delivering headline earnings of R606 million (2009: R309 million).
Shareholder value was enhanced, as evidenced by the correct allocation of capital and liquidity usage, integration costs of R110 million incurred to unlock benefits of R200 million, increased pricing for risk, and the sustained combined retail motor market share above 30%.
| This page was updated on 30 March, 2011 |  Return to top |
