ECONOMIC SUSTAINABILITY

CONTRIBUTING TO THE ECONOMIC SUSTAINABILITY OF OUR CLIENTS

The economic sustainability of Nedbank Group’s stakeholders – clients, investors, employees or individuals or communities touched by the work we do – is directly influenced by the bank’s ability to operate according to key sustainability requirements, including compliance with relevant legislation and regulations, continued profitability through sound business and risk management practices, a commitment to responsible lending and environmentally friendly operations, and an ongoing passion to uplifting those who find themselves in less than fortunate situations due to poverty or illness.

ECONOMIC SUSTAINABILITY THROUGH REGULATORY COMPLIANCE

NATIONAL CREDIT ACT

Nedbank Group supports the objectives of the NCA, and invests in training on policy and processes, system requirements and changes to ensure compliance with the provisions of the NCA. Training is aimed at creating awareness among staff, enabling them to educate consumers and prevent their own overindebtedness. Nedbank has also signed a code of conduct governing lending and the extension of credit.

DATA PROTECTION AND PRIVACY

All personal client information is treated as private and confidential and Nedbank Group complies with the Electronic Communications and Transactions Act regarding client privacy and the Financial Advisory and Intermediary Services Act (FAIS). Policies and processes govern each division’s adherence to client privacy and confidentiality requirements.

RESPONSIBLE PRODUCT INFORMATION AND LABELLING

In accordance with FAIS, detailed product brochures are available, and relationship managers are tasked with explaining the characteristics, benefits and implications of products to clients.

ENHANCING CLIENT ECONOMIC SUSTAINABILITY BY UNDERSTANDING NEEDS AND MEETING SERVICE EXPECTATIONS

PRODUCT OFFERING

The Nedbank Affinity Programme:

The Nedbank Affinity Programme, which started in 1990, is a unique programme whereby Nedbank clients are given the opportunity to bank, invest and insure with Nedbank, while at the same time supporting an environmental or social cause close to their heart, all at no cost to them. The donations are made possible through Nedbank sacrificing some of its margin. Since inception in 1990 over R130 million has been donated and over 1 000 projects funded.

The programme includes four affinity programmes, namely: the Nedbank Green Affinity, which supports conservation, the environment and climate change through The Green Trust (details of The Green Trust are contained in the Environmental section of this report on page 66); the Nedbank Children’s Affinity, which supports needy children in partnership with the Nelson Mandela Children’s Fund; the Nedbank Sport Affinity, which supports sport development in South Africa through The Sports Trust; and the Nedbank Arts Affinity, which supports South Africa’s arts and cultural heritage through the Arts & Culture Trust. (Details of the other affinity programmes may be found in the Social section of this report.)

Each affinity programme is governed via an independent trust, consisting of Nedbank representatives and experts in their particular field.

During 2009 the Affinity Programme client base grew by 10% and donations to the affinity partners grew by 14% year-on-year. New products and services were also added to the programme, including the affinity investment accounts, insurance, new Nedbank eStatements and client voluntary donations, all providing for additional donations to the trusts and funds.

How the Nedbank Affinity Programme works

Credit card – a percentage of a client’s purchase is donated to the trust/fund, at no cost to the client.

CURRENT ACCOUNT:

Cheque card – a fixed amount is donated per purchase transaction with a client's cheque card, at no cost to the client.
Chequebook – when a client orders a new chequebook, Nedbank makes a donation to the trust/fund, at no cost to the client.
Savings account – when a client opens the account, a donation is made to the trust/fund. A further donation is made quarterly based on a client’s daily credit balance. All of these are at no cost to the client.
My Cover short-term insurance – a fixed amount is donated when a client pays his/her monthly premium for the My Cover short-term-insurance product (applicable to the Nedbank Green Affinity only). The funding for the programme is provided through Nedbank sacrificing some of its profit margin when a client elects to be part of the programme by acquiring any or a combination of the abovementioned products. The more clients use their affinity products, the more Nedbank donates funds to their chosen cause.

NEW:

Investments – a percentage of what a client invests is donated, at no extra cost to the client and no impact on the client’s return of investment.
Savvy Electronic accounts – donations are made on behalf of the client who uses non-electronic channels.
Voluntary donations – clients may elect to make regular or once-off contributions to the cause of their choice, whether they have a product linked to the affinity programmes or not. The contributions are donated at no extra cost to the client.

Nedbank Retail

Nedbank Retail provides transactional, card, lending and investment products and services designed to meet the banking and finance needs of individuals and small businesses in the affluent, middle and mass market segments. Our segmentation model, which is entrenched in the ‘bank for all’ strategy, is aimed at creating the necessary focus per segment to deliver the right products and services based on client needs.

In recent years Nedbank Retail has been built on the sound foundation laid in 2004/2005. Good progress has been made in this time, with the initial primary focus of fixing and consolidating the business shifting heavily towards growing the business. In 2008 and 2009 the focus of Nedbank Retail shifted again to 'managing for value' in response to external developments on the global and local economic fronts.

The year 2009 proved a particularly difficult year for the division as the South African economy drifted into its first recession in 17 years, resulting in consumer and business confidence levels dropping to record lows. Given this recessionary environment, the key challenges facing the business were:

High bad debts – Both individual and business affordability levels dropped, resulting in increased defaults on advances. Debt counselling cases, Nedbank-owned properties, and the increasing size of our legal portfolios are primary concerns.
Margin compression – This has been mainly due to reduced endowment income on capital and non-rate-sensitive deposits as interest rates dropped faster than expected. The higher cost of funding, given the global financial crisis, also impacted on margins.
Lower-than-expected sales volumes – This is primarily due to a significant drop in credit demand and affordability constraints.
Increasing fraud levels – as a function of increased financial stress levels among individuals and businesses.

The response to these challenges was to focus on:

continued tightening of credit policy and concentration on collections and impairments;
stringent expense control and enhanced efficiencies;
execution of 'manage for value' strategies in our low-economic-profit businesses, with a specific focus on home loans and vehicle and asset-based finance;
investment in businesses that contribute the most to economic profit, with a specific focus on bancassurance and wealth (B&W);
building and entrenching a differentiated service culture for competitive advantage;
building our primary-client base through focused strategies in each segment and targeting primary-client growth, with an emphasis on quality sales; and
increased efforts in contributing to the national agenda, particularly from a transformation and environment perspective.

In the future it is the aim of Nedbank Retail to become a more client-driven and integrated business, primarily focusing on non-interest revenue growth and delivering economic profit, while harnessing risk as an enabler. In managing the business through the current challenging economic cycle, the following focus areas have been identified:

Non-interest revenue (NIR) growth through primary-client acquisition, quality sales, driving cross sales and reducing attrition.
Economic profit contribution of the business through effective collection, risk management and selective asset growth; optimising the efficiency of capital usage; retaining and growing liabilities; and growing bancassurance penetration.
Development of a client management strategy to drive retention, efficiencies, acquisition and penetration (REAP) across the business.
A comprehensive technology roadmap, to ensure that technology investment is focused on addressing core client needs and goals.
Defining and investing in the three levels of a competency-based culture to equip staff with appropriate skills, and improve the efficiency and effectiveness of the functions of human resources.

Nedbank Retail launched the following products and services in 2009:

Nedbank’s Personal Money Manager – a free offering that enables clients to analyse and track transactions on their bank statements downloaded via internet banking.
eStatements – email statements on card and current account products to promote paper reduction and reduce the group’s carbon footprint.
Savvy Electronic Current Account – this bundled product with fixed-fee pricing is designed for clients who want to transact and manage their accounts electronically. By incentivising the utilisation of self-service channels, such as the internet, mobile banking and ATMs, the product reduces clients’ dependence on human intervention and paper- based services.
Salary Protection Cover – Nedbank current accountholders who are concerned about job security and income protection can now enjoy some peace of mind thanks to Nedbank Retail’s salary protection offer, which provides free retrenchment, death and disability cover on their salary for a period of 18 months.
Zakheleni Loan product – a loan facility that is aimed at voluntary associations or groups of individuals, the product gives members access to credit that can be used for any purpose.

The full Nedbank product and service offering is available at www.nedbankgroup.co.za.

Bancassurance and Wealth

Bancassurance and Wealth (B&W) is a cluster of Nedbank that provides services across Retail, Business Banking and Corporate Banking as well as to the external market. The businesses within B&W encompass life assurance, short-term insurance, financial planning and insurance brokerages, fully fledged private banking locally and internationally as well as asset management.

B&W comprises four divisions; made up of nine businesses, across five industries and two geographies. The four divisions are:

Bancassurance – including Nedgroup Life Assurance, Nedbank Group Insurance Brokers and Nedgroup Insurance Company.
Asset Management – including Nedgroup Investments Local and International and HNW asset management locally and internationally.
SA Wealth Management – including BoE Private Clients and Fiduciary, Nedbank Financial Planning.
International Wealth Management – comprising Fairbairn Private Bank and International Trust.

2009 has been a year of enormous developments for B&W. With effect from 1 June 2009 Nedbank acquired the remaining share of the previously held Old Mutual joint ventures of:

50% of BoE (Pty) Limited (BoE)
50% of Nedgroup Life Assurance Company (NedLife)
29,7% of Fairbairn Private Bank (FPB)

The purchase of the joint ventures (JVs) has removed all structural and legacy obstacles. This now presents an opportunity to become more client-centric, simplify focus and maximising value through cross-sell and further penetration of the Nedbank and Imperial client bases.

A more recent exciting development has been the Nedbank Board decision to incorporate B&W as a standalone group cluster – previously a subdivision of Nedbank Retail. This decision has been partly the result of an increased group focus on non-interest revenue (NIR), growth in B&W contribution to group headline earnings as well as the significant investment in the purchase of the JVs.

The purchase of the JVs, lifting of product restrictions and move to a group cluster have resulted in the removal of all structural and legacy obstacles and presented us with an opportunity to become more client-centric. Our journey of building a joint vision, accountability and ownership ultimately resulted in the birth of a new B&W management structure. The most significant changes to our structure include the consolidation of four previously independently run asset management operations and the formation of an aligned local and international wealth management business.

The B&W strategic focus for 2010 will be driven by:

An aligned high-net-worth strategy.
A single advice and wealth client value proposition.
Incorporate Imperial Professional Finance and develop professional strategy.
Consolidate four asset management operations into a single asset management division (focused on best of breed, solutions and active management).
Build new life and short-term products post JV restrictions, cross-sell into B&W, Nedbank and Imperial.

During 2009 B&W invested in various initiatives to build sustainability awareness and solutions relating to sustainability. These initiatives include:

Development of various product offerings, enabling our clients to reduce the economic risks associated with the current economic cycle (Nedbank Striker Plan, Nedbank Defender Plan, Salary Protector Plan, Balance Protection Plan, Payment Protection Plan, etc).
Strategies around the reduction of travel, paper, water and electricity usage.
Internal awareness campaigns, including competitions, DVDs and emails.
Participation in national events and programmes such as Shavathon 2009 and Fundisa.

The full Nedbank product and service offering is available at www.nedbank.co.za.

SERVICE DELIVERY

Client service remained a key differentiator in 2009. Nedbank Retail has made huge strides over the years in its journey to deliver ‘worldclass service’.

Enhancing productivity and service

In an effort to enhance productivity and execution further Nedbank Retail undertook the following projects in 2009:

Project LEAN – focused on driving process improvements in the frontline. Process time has been reduced by 42%. This has resulted in doubling the amount of time available for our staff to service our clients.
Project Siyakha – focused on delivering a step change in the systems with which our sales staff interact in order to improve client service and staff efficiency. Siyakha is a four-year phased programme that began in 2007 and has already delivered some of the business benefits to the sales process. The result will be one frontend for sales in addition to streamlined and reengineered processes to minimise the impact on both clients and bankers.
Project Hassle-free Move – aimed at delivering an efficient solution for switching clients from other banks to Nedbank.

Additional productivity and execution highlights in 2009 included:

Redesigning the vehicle and asset finance operations process to deliver an efficient solution for branch operations.
Improved client communication on transactional products through electronic alerts to reduce losses due to fraud.

Nedbank Retail made steady progress during 2009 in terms of growing its client base. In 2009 the net new Retail primary- client number was 108 267. This represented a growth of 9,08% year on year.

Primary-client growth remains a key focus in the Nedbank Retail strategy.

In support of this focus area, a service culture programme known as The World-class Service Way was launched in the second half of 2009. The programme hinges on four key behaviours, all of which affect the quality of our interactions with clients – both internally and externally – with the intent of creating a unique service culture within Nedbank.

The World-class Service Programme

One of our key focus areas has been the World-class Service (WCS) Programme, which was launched in 2006. The overall objective of the WCS Programme is to improve the client experience within Nedbank. The WCS Programme has provided insight, focus, direction and coordinated efforts across the business in creating the distinctive Nedbank service experience. During 2009 the success of the WCS Programme continued, with the following key highlights and challenges experienced:

CMAT™

Having secured our position as a top-quartile CMAT™ company in 2007, the fourth annual CMAT™ assessment in 2009 saw our score increase by three points to 47%. While we acknowledge that there is still work to be done to achieve our aspiration of consistently delivering worldclass service, our staffmembers are to be commended for their efforts and progress thus far.

Ask Afrika Orange Index

During 2009 Nedbank achieved a rating of 66,19 on the Ask Afrika poll of service excellence, the Orange Index, registering an improvement of 0,55 over the last 12 months.

While Nedbank only improved marginally, the other three big SA banks enjoyed significant improvements – effectively overtaking us in the rankings. As a result, Nedbank dropped from 19th to 25th position in the overall SA Index.

Encouragingly, the banking sector as a whole moved from ninth place in 2008 to first place in the 2009 sector rankings.

Ombudsman for Banking Services

Managing the service experiences of our clients when things go wrong is a core measure of how the bank excels at service excellence. At the Ombudsman for Banking Services (OBS) Awards function 2009 Nedbank was voted the best bank in dispute resolution. The Ombudsman's office independently nominates a bank judged to have excelled at dispute resolution, which is based on the following criteria for closed cases managed in the year:

Time in which the responses were supplied.
Comprehensiveness of the response received.
Overall fairness in settling the complaint.
General support for OBS initiatives.

Given a very challenging year for banking consumers and the industry as a whole, 2009 saw a marginal increase in the percentage of rulings against Nedbank by the Ombudsman for Banking Services (OBS) – 29% of cases were ruled against Nedbank during 2009 (2008: 27%).

Nedbank Group encourages two-way communication between its servicing channels and its clients. The staff-driven Client Complaints Tracker (CCT) SMART Campaign has incentivised complaint-capturing and resolution in the Nedbank Retail branch network and has also allowed the central Service Action Forums to identify any systemic service issues that needed to be resolved at an enterprise level. In line with our servicing strategy, the number of client complaints recorded via our CCT system has increased from 44 200 cases in 2008 to 54 640 cases in 2009.

AskOnce

AskOnce has continued to support Nedbank's drive to be a bank that offers worldclass service by responding to the heart of what matters most to our clients. AskOnce is our core service value proposition to our clients and, with focused marketing in 2009, Nedbank increased general awareness in the market from 38% in 2008 to 41% in 2009. In June 2009 edbank included a new promise. The AskOnce promises are:

You only have to ask once. The person you talk to will take responsibility for ensuring your request is resolved.
We will actively manage our branch queues – if you feel that you have waited too long, please ask the branch manager to assist you.
You will always have the option to speak to a ‘real’ person at our contact centres.
Our contact centres will call you back if your request is not resolved the first time.
At your request, we will always send an SMS confirmation of high-value credit card transactions.
Your credit card will be delivered to your branch of choice, on time, every time.
When you switch your current account to Nedbank, we will move your debit orders for you. Hassle-free.

Every time a client brings a broken promise to our attention, we donate R50 to charity. The initiative has seen us paying over R90 000 to charities.

Insights from the bank’s complaints systems and AskOnce have highlighted application turnaround times, queuing-related issues and client-staff engagement as key focus areas for improving client service.

Nedbank Home Loans changed its application processes with the implementation of Staffware 11i in 2009, streamlining the end-to-end processing of home loan applications. The new workflow system provided further opportunities for automation that will assist with improved turnaround times and data quality. The Vehicle and Asset Finance Division implemented a straight-through processing system, which has shown a greater than 30% improvement in turnaround times for their dealer clients in 2009 when compared with 2008. Many of the synergies are still being realised and hence further improvements for this metric is expected during 2010.

Work has also continued in reviewing branch capacity and client experience propositions, and a number of projects are underway to reduce queuing times in branches. In addition, through the Service Action Forum, 34 service-related issues were resolved in 2009, including effective debit order management through the Non-authenticated Early Debit Order System, which will prevent multiple unpaid items being unnecessarily generated on a client’s account.

Summary of key service metrics

Retail client experience measurement framework
Metric	2005	2006	2007	2008	2009

CMAT™ score	• N/A	• 36 (Ave)	• 44 (Top quartile)	• 50 (Top decile) – 44 for version 5	• 47 (v5) Version 5 – (Top quartile)
Orange Index	• N/A	• 45 (#5 bank)	• 32 (#1 bank)	• 19 (#1 bank)	• 25 (#4 bank)
Hello Peter (above-average case resolution)	• N/A	• N/A	• 35% (#3 bank)	• 44% (#1 bank)	• 44% (#1 bank)
Client satisfaction^✤	• 62,6	• 64,6%	• 68,6%	• 74,1%	• N/A
OBS rulings (against Nedbank)	• 52	• 39%	• 30% (#1 bank)	• 27% (#1 bank)	• 29% (#2 bank)
Client loyalty* (CEM – NPS score)	• N/A	• N/A	• N/A	• N/A	• 25% (52% – 27%)
Ops metrics (eg HL apps TAT)	• 80 hrs	• 68 hrs	• 49 hrs	• 43 hrs	• 52 hrs**

WCS: NPS = Nett Promoter Score = measure of loyalty (ratings > 8) – (ratings < 7). Question = likelihood to recommend Nedbank
Notes:	^✤	– Clients rating case resolution either 'over the moon' or 'quite impressed'.
	*	– Sample-weighted Net Promoter Score for branch, NCC and Pvt Bank.
	**	– Turnaround times increased due to the unique conditions presented in 2009 ie increased credit appeals and physical valuations.

COMPETITIVE PRICING

Over the last five years Nedbank Retail has reduced and simplified its fees to bring clients the best possible combination of products and services at the right price. Nedbank has also introduced innovative tools such as the Bank Fees Calculator and a Pricing Call Centre to help clients choose the products that best suit their banking needs and budgets.

Nedbank Group’s innovative approach to pricing has enabled the bank to manage its fees to between 6% and 39% below what they were in 2005, which was confirmed in the 2009 Finweek Bank Charges Report. The report also pointed out that Nedbank is now the least expensive bank in both the pay- as-you-bank and packaged banking options. Nedbank’s fee increases from 2008 to 2009 were also the lowest of the banks surveyed.

The Competition Commission’s inquiry into banking

The banking inquiry was established by the Competition Commission in August 2006 to examine certain aspects of competition in retail banking in South Africa. Following the release of the final report, a Banking Inquiry Steering Committee and intergovernmental working groups were set up under the auspices of the National Treasury. These working groups are currently considering the report and consulting with various stakeholders and other government departments to assess recommendations.

Nedbank is cooperating with the National Treasury in this process and has responded to information requests and participated in several working groups during the past year.

Details regarding Nedbank’s initiatives in support of socioeconomic development as a means of enhancing economic sustainability beyond the bank are included in the following Social sustainability section of this report.


	BoE Private Clients was rated No 1 in service and advice in a survey conducted by SMRC Marketing Solutions.

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