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REVIEW OF 2010
IN 2010 NEDBANK GROUP IMPROVED ITS NON-FINANCIAL KEY PERFORMANCE INDICATORS IN SEVERAL OPERATIONAL AREAS. THIS WAS A DIRECT RESULT OF THE GROUP’S FOCUS OF DELIVERING ON ITS STRATEGIC OBJECTIVES AND A CLEAR COMMITMENT TO INNOVATION AS A STRATEGIC DIFFERENTIATOR WITHIN THE VARIOUS AREAS OF THE BUSINESS. THE PERFORMANCE SCORECARD BELOW REFLECTS THE MOST SIGNIFICANT PERFORMANCE INDICATORS FOR THE PERIOD UNDER REVIEW.
STAFF
Deep Green aspiration: To become a great place to work, to create a community of leaders, to live our values.
OBJECTIVE |
MAKING IT HAPPEN IN 2010 |
2010 SELF-ASSESSMENT |
| Build an enabling high performance culture |
The 2010 Barrett Survey results showed ‘commitment’ as a group value for the first time. The entropy score remained at the same good level it was in 2009 (13%). Six culture matches were recorded – indicative of an aligned and well-performing culture. | Achieved. |
| Improve staff satisfaction | Staff morale remains positive despite the tough operating environment. The Nedbank
Group 2010 Staff Survey scores declined slightly from those of 2009, but still remain at high levels. Focus group meetings were held with middle managers, which have resulted in the cascading of initiatives to provide greater insight into leadership attributes. |
Small decline, but overall levels remain high. |
| Embed talent management | Robust succession plans were completed and signed off for key jobs and cluster executive
roles. The individual profiles for successors have been enhanced. Staff attrition declined to well below the industry average. |
Achieved. |
| Enable human resources (HR) capability and excellence |
The HR 2010 and Beyond programme continued to progress well with the primary focus
on understanding the efficiencies achievable and implementing the requirements for upskilling of the HR community to deliver sustainable excellence. |
Achieved. |
| Learn and grow | Nedbank Group achieved its skills development target, allocating 71% of skills
development spend to previously disadvantaged groups. The group spent R244 million on training in 2010, which is 3,8% of basic payroll, with 2,8% of basic payroll having been spent on black staff, adjusted for gender recognition. The Nedbank Integrated Learning Framework was also piloted in 2010. |
Achieved. |
| Accelerate transformation | Nedbank Group continued to focus on initiatives aimed at promoting understanding and
tolerance, and fostering good relations among employees, including specific initiatives for women and people with disabilities. The group achieved 90% or more on six of the nine focus areas listed in its employment equity targets. The African senior and middle management targets were not achieved in 2010, while Imperial Bank continued to impact negatively on the overall levels within the junior management category. A major challenge is the establishment of a robust talent pipeline for senior management and executive-level transformation and the appointment of Africans at middle and senior management levels. The rising cost of attracting and retaining talent within designated groups remains a challenge to the achievement of transformation targets. 27% of total training spend (R40 million) was on strategic programmes supporting transformation. |
Initial targets not achieved but overall improvement on 2009. |
CLIENTS
Deep Green aspiration: To become a great place to bank.
OBJECTIVE |
MAKING IT HAPPEN IN 2010 |
2010 SELF-ASSESSMENT |
| Rebuild Nedbank Retail | Market share remained relatively consistent across the board in 2010, with emphasis
on risk-based pricing. Imperial Bank’s Motor Finance Corporation (MFC), which is now
integrated into Nedbank Retail, continued to benefit from its focus on the used-vehicle
market by growing its share of vehicle lending, thereby helping to cure Nedbank Retail
suboptimal vehicle and asset finance business market share. The following market share changes occurred for key products: • Home loans declined from 17% to 16,7% in line with the group’s portfolio tilt strategy that emphasises areas with strong economic profit; • Vehicle and asset finance, including MFC, increased from 29,1% to 31,8%; and • Nedbank personal loans decreased slightly from 14,4% to 14,2%, while maintaining the second largest market share of the big four banks. Share of the deposit market was a strong 22% at year-end. Nedbank Retail was able to attract some 96 000 new primary clients, 7,4% more than in the previous year, with a total client base of 4,5 million (during 2010 the group underwent a review of the active client base and excluded accounts that have been dormant for long periods from the overall client base). The number of Mzansi clients increased by 27% to 1 017 million after restating the base for the closure of dormant Mzansi accounts. In partnership with Vodacom, Nedbank launched the M-PESA mobile banking solution in South Africa. M-PESA is an affordable and easy-to-use entry-level offering that is a complementary product to Mzansi. Simplified front end functionality on the ‘Siyakha’ branch platform is in pilot and will be rolled out during 2011 across all client-facing channels. |
Achieved. |
| Ramp up Nedbank Wealth | Nedbank Wealth achieved a significant earnings increase pursuant to good growth from
the Insurance Division, excellent asset management performance and progress against the strategy implemented after the former Old Mutual joint venture buyout. New products and innovation Insurance: • Warranty, top up, tyre and rim in MFC (short term) • Credit guarantee in Nedbank Namibia (short term) • Fully underwritten product 360life and the wellness programme become (life) • Credit life sales into MFC clients (life) Asset Management: • Best of Breed international Wealth Management: • Best of Breed Asset Management International • International Trust: Qualifying Recognised Overseas Pension Schemes Nedbank Wealth accolades • Fairbairn Private Bank received the award of Best International Bank and Wealth Manager at the International Fund and Product Awards 2010 for the offshore financial services industry. • Nedgroup Investments was: – placed second in the PlexCrown Survey; – won the Morningstar Best Large Fund House Award; – placed second in the Raging Bull Awards for Best Domestic Management Company; and – received individual recognition for a number of funds. |
Achieved. |
| Retain leadership position in wholesale banking |
The group maintained strong market share of other private sector loans (excluding foreign
currency loans). Maintained the largest property finance market share among banks in South Africa, while maintaining a high-quality portfolio. Accolades received • Global Trade Review Best Deal award for FirstCape Vineyards. |
Achieved. |
| Leader in business banking for South Africa |
Nedbank Business Banking’s client management capabilities were rated fifth highest out of
900 global companies surveyed globally as part of the Customer Management Assessment Tool (CMAT™) research process. Nedbank Business Banking achieved the best ever score for a full business-to-business company. Client satisfaction statistics are improving significantly and client loyalty is at an all-time high. People metrics improved significantly, despite the challenging financial and economic circumstances. Worldclass risk management for the sixth successive year as evidenced by a credit loss ratio of 40 basis points and reduction in allocated capital of R1,1 billion. |
Achieved. |
| Grow primary-client status and transactional income streams | Nedbank Retail grew its number of primary clients by some 96 000, which is 7,4% more
than in 2009. Nedbank Business Banking net primary-banked client acquisition improved 35% year-on-year. Nedbank Corporate primary clients increased by a net 20. |
Achieved. |
| Improve service levels to worldclass standards | Improved score in the Ask Afrika Orange Index. During 2010, Nedbank Retail once again improved its client management capability, by achieving a CMAT™ score of 49 which is within the top decile of the CMAT™ business database comprising over 760 companies worldwide. Nedbank Retail also showed a material improvement on its key client experience scores as measured in an independent banking industry study. Good progress was made in Nedbank Corporate in improving most scores in the 2010 StarTrack Client Survey. Ranked first in five of the seven most important aspects of client needs. A total of 49 972 client complaints were received via the Client Complaint Tracker System. |
Achieved. |
| Expand distribution footprint | In 2010 significant investment was made to expand the group’s distribution footprint with an additional 409 ATMs, 17 branches, 13 Personal Loans branches and 70 kiosks as well as 69 outlets in retailers. | Achieved. |
| Improve positioning in the public sector | Nedbank Group participated in the majority of public sector business tenders during 2010
and was appointed primary banker by six public sector entities. The business retained its share of public sector liabilities and exceeded the targets for non-interest revenue (NIR) and asset growth. Feedback from various levels of government has indicated that Nedbank Group is now well-recognised as a reliable partner to the public sector. |
Achieved. |
| Selectively expand into Africa and leverage the Ecobank Nedbank Alliance | The group continued to build on the initial foundations of the Ecobank Nedbank Alliance
with a number of major achievements during 2010 . Various banking initiatives were implemented that align with the vision of providing clients with a one-bank experience across the African continent. This included the enabling of Ecobank regional cards on Nedbank ATMs in South Africa. Revenue is being generated as a result of an effective client engagement approach supported by streamlined operational processing. Client activity in sub-Saharan Africa increased significantly during 2010 and is reflected in the increased pipeline, transactional revenue and account openings that have been recorded across the business clusters. The Ecobank Nedbank Alliance was recognised as the Most Innovative Bank in Africa at the African Banker Awards ceremony held in Washington during the 2010 annual World Bank and International Monetary Fund meetings. |
Achieved. |
SHAREHOLDERS
Deep Green aspiration: To become a great place to invest.
OBJECTIVE |
2010 |
2009 |
2010 SELF-ASSESSMENT |
MEDIUM-TO LONG-TERM TARGETS* |
| Return on equity (excluding goodwill) |
13,4% | 13,4% | In line with expectations. | 5% above monthly weighted-average cost
of ordinary shareholders’ equity (cost of equity). |
| Efficiency ratio | 55,7% | 53,5% | Not achieved. | < 50%. |
| Growth in diluted headline earnings per share |
8,7% | (29,8%) | Improved, exceeding 2010 forecast expectations. | At least CPIX + gross domestic product (GDP) growth + 5%. |
| Credit loss ratio | 1,36% | 1,52% | Improved but at a slower rate than expected for 2010. |
Between 0,60% and 1,00% of average advances. |
| NIR/expense ratio | 79,6% | 78,8% | Improved in line with 2010 expectations. | > 85%. |
| Core Tier 1 ratio** | 10,1% | 9,9% | Exceeded. | 7,5% to 9,0%. |
| Tier 1 ratio** | 11,7% | 11,5% | Exceeded. | 8,5% to 10,0%. |
| Total ratio** | 15,0% | 14,9% | Exceeded. | 11,5% to 13,0%. |
| Economic capital | Yes | Yes | Achieved. | Capitalised to 99,93% confidence interval on economic capital basis (target debt rating A including 10% buffer). |
| Dividend cover policy | 2,3 | 2,3 | Achieved. | Range of 2,25 to 2,75 times. |
* Unchanged from 2010 targets.
** Capital adequacy ratios.
REGULATORS
Deep Green aspiration: To be worldclass at managing risk.
OBJECTIVE |
MAKING IT HAPPEN IN 2010 |
2010 SELF-ASSESSMENT |
| Manage risk as an enabler | Received continued acknowledgement for a worldclass risk management process with
ongoing focus on enhancement of risk practices and processes. Maintained a strong risk culture underpinned by sound risk governance and endorsed by the Enterprisewide Risk Management Framework. Received approval of the Advanced Management Approach for operational risk and Internal Measurement Approach for market risk by the South African Reserve Bank. Bolstered scarce resources to manage quantitative risks (credit, operational and market risk) with new skilled appointments. Instituted new controls to coordinate risk management of credit and market risks. Managed risk (and opportunity) to ensure Nedbank Group’s preparedness for the FIFA 2010 World Cup. Maintained sound regulatory relationships and received good feedback from regulators and government stakeholders. Particular emphasis placed on strengthening the relationship between the board and Executive Committee. Managed the group within its risk appetite. Actively participated in the finalisation of section 136(2) of the new Companies Act. Group Forensics and Risk Services remained worldclass, with significant reductions in robberies and ATM bombings. Improved physical security and bolstering of forensic skills. Managed social and environmental risk (including climate change). |
Achieved |
| Optimise capital and liquidity | Liquidity risk managed well during the sovereign debt crisis. Capital adequacy ratios maintained above their target ranges. Average long-term funding ratio for the fourth quarter improved from 20,1% in 2009 to 24,0% in 2010. |
Achieved |
COMMUNITIES
Deep Green aspirations: To be recognised for being highly involved in the community, to become a bank for all South Africans,
to lead in transformation, to have the most respected and aspirational brand and to lead as a corporate citizen.
OBJECTIVE |
MAKING IT HAPPEN IN 2010 |
2010 SELF-ASSESSMENT |
| Build the Nedbank brand
and become a bank for all in South Africa |
A significant brand revitalisation project was initiated and completed in 2010, with key
outputs being a sharpened, focused and more distinctive Nedbank brand story, and a framework and improved processes for building the Nedbank brand on a sustainable integrated basis across the bank’s diverse target markets. The health and equity of the brand continued to show strong and consistent improvement in all key brand metrics as measured in externally sourced brand-tracking studies. Mass market advertising and group sponsorships played the most visible and impactful role in supporting the group’s brand building goals. In its third year the Nedbank Cup soccer knockout tournament once again had notable impact and made an important contribution to improving brand saliency and positively influencing market perceptions. The Cup final was a sellout and attracted the largest TV audience in the history of the event. The Nedbank Golf Challenge celebrated its 30th anniversary, with very positive media, public and client reaction. Nedbank Group’s positioning as the green bank and leader in environmental care was significantly enhanced and projected during the year by a number of high-profile and high-impact initiatives. A major highlight was the achievement of carbon-neutral status in August. The World Wide Fund for Nature Nedbank Green Trust marked the 20th anniversary of its partnership with Nedbank Group. Over R100 million has been invested in climate change and many conservation projects. Offerings such as Nedbank Savvy, M-PESA and Personal Loans are already attracting new clients, in keeping with Nedbank Group’s aspirational ‘bank for all’ positioning. |
Achieved. |
| Become South Africa’s green and caring bank |
Nedbank Group is included in the following indices/ratings: • South African Carbon Disclosure Leadership Index: 2010 – recognised as a leader in the Performance category and placed third in the Disclosure category. • Dow Jones World Sustainability Index (one of 23 banks worldwide and three SA companies). • JSE Social Responsibility Index. • Ranked in the top third on the Global 1000 Sustainable Performance Leaders Index (third-highest SA company). • Green building 4-star rating for the second phase of the group’s head office. Nedbank Group won various sustainability awards: • Emerging Markets Sustainable Bank of the Year for Middle East and Africa: 2007, 2008 and 2010. • 2009 Sustainability Report was rated as excellent in the Ernst & Young Excellence in Sustainability Reporting Awards. • Climate Change Leadership Awards: Winner Corporate Services Sector. • Runner-up in the ‘Best Employee Community Involvement Programme' in the Mail & Guardian 2010 Invest in the Future and the Southern Africa Trust Awards. The Nedbank Affinities programme saw: • growth of 23,3% in clients registered with the programme; and • year-on-year growth of 13,8% in donations to the affinity partners. |
Achieved. |
| Accelerate transformation | Nedbank Group managed to maintain a level 2 rating in respect of the broad-based black economic empowerment Codes of the Department of Trade and Industry and was ranked as South Africa’s third most empowered corporate and number one bank and financial services group by the Financial Mail Empowerdex Survey for the past two years. | Achieved. |
