ECONOMIC SUSTAINABILITY

DELIVERING SHAREHOLDER VALUE

SHAREHOLDERS AND THE INVESTMENT COMMUNITY

Nedbank Group provides relevant, reliable and timeous information to shareholders to help them make informed investment decisions. We engage with the investment community on an ongoing basis to understand shareholder requirements and manage expectations proactively and transparently. Regular feedback from the investment community is provided to the Nedbank Group Exco and the Nedbank Group Board and is considered when group strategies are formulated.

To ensure meaningful and effective shareholder engagement information is disclosed equally and simultaneously to shareholders, analysts and market participants, both locally and internationally, through many communication channels, including results presentations, analyst presentations in areas of specified interest, conferences, teleconferences, webcasts and TV broadcasts, media releases, the annual general meeting, the annual reports, results and dividend announcements, the Securities Exchange News Service (SENS) and the corporate website at www.nedbankgroup.co.za.

All investor meetings are formally minuted and attended by more than one person from Nedbank Group or the investor relations consultancy. There are currently 13 broker analysts who analyse and publish research on Nedbank Group.

Debt investor relations activities continued in 2009 with interaction across a broad spectrum of asset managers. During September 2009 the group successfully placed R5,4 billion of JSE-listed senior unsecured debt. Local and offshore opportunities to place both capital and senior instruments remain a key aspect of balance sheet management.

GROUP PERFORMANCE AND MEDIUM- TO LONG-TERM TARGETS

	Medium- to long-term targets	2010 outlook

Economic	5% above monthly weighted average cost of ordinary shareholders’ equity	Improving, but below target.
Efficiency ratio	< 50,0%	Worsening, remaining above target.
NIR/expenses ratio	> 85%	Improving, but below target.
Growth in diluted headline EPS	At least consumer price index + GDP growth + 5%	Improving, forecast to exceed target.
Impairment charge (credit loss ratio)	Between 0,6% and 1,0% of average advances	Improving, but above target.
Basel II core Tier 1 capital adequacy ratio	7,5% to 9,0%	Improving, above top end of target.
Basel II Tier 1 capital adequacy ratio	8,5% to 10,0%	Improving, above top end of range.
Basel II total capital adequacy ratio	11,5% to 13,0%	Improving, above top end of range.
Economic capital	Capitalised to 99,93% confidence interval on economic capital basis (target debt rating A including 10% buffer)	A including 10% buffer.
Dividend cover policy	2,25 to 2,75 times	2,25 to 2,75 times.

For details regarding Nedbank Group’s prospects for 2010, its understanding of the economic outlook and banking environment for the coming year, and its shareholder analysis and credit rating, please refer to the 2009 Annual Report.

Nedbank Group received the Best Reporting and Communication Award for the Banking Sector from the Investor Analyst Society (IAS).

Economic outlook, targets and prospects for 2010

The group currently anticipates gross domestic product (GDP) growth of around 2% in 2010, indicating slightly better prospects for the banking sector. The global environment and the 2010 FIFA World Cup are primary factors influencing domestic recovery, although the global recovery remains fragile and reliant on continued government support.

Locally retail trading conditions are expected to improve as disposable income stabilises, retrenchments ease, general labour conditions start improving, debt burdens moderate and house prices start to recover. Interest rates are likely to remain steady at current levels and lead to lower impairment levels.

Fixed-investment activity is expected to remain modest as a result of excess capacity in the private sector and some loss in momentum in the government’s infrastructure spending programme as several large projects around the hosting of the FIFA World Cup are completed.

Interest rate cuts from the previous year will continue to have a negative endowment effect on banking margins, but should be partially offset by a gradual decrease in impairments as recoveries and arrears levels improve.

Please refer to the 2009 Nedbank Annual Report for further details regarding the likely Nedbank Group performance in 2010.

Eyethu shareholders

Please refer to the Black Economic Empowerment (BEE) Report..

Credit ratings

To provide investors and other stakeholders with further independent information Nedbank Group engages two rating agencies, namely Fitch Ratings and Moody's Investors Service. Please refer to the 2009 Nedbank Annual Report at for further details in this regard.

Capital adequacy

Nedbank Group Limited has again strengthened its regulatory capital ratios in 2009, with a Tier 1 capital adequacy ratio of 11,5% (2008: 9,6%) and a total capital adequacy ratio of 14,9% (2008: 12,4%). The core Tier 1 capital adequacy ratio was 9,9% (2008: 8,2%).

Nedbank Limited has also strengthened regulatory capital ratios, with a Tier 1 capital adequacy ratio of 11,7% (2008: 9,8%) and a total capital adequacy ratio of 15,6% (2008: 13,1%). The core Tier 1 capital adequacy ratio was 9,6% (2008: 8,0%). All capital adequacy ratios are now well above the group's target ranges, including core Tier 1. They include unappropriated profits at the year-end to the extent that these are not expected to reverse and are expected to be appropriated subsequent to the year-end.

Nedbank Group's capital adequacy ratios increased significantly over the past two years due to a strong focus on the optimisation of risk-weighted assets (capital), enabled by enhancing data quality and more selective asset growth using our economic-profit-based philosophy of managing for value, the retention of earnings, the profits made on the disposal of Visa shares in 2008 and the issuing of some non-core Tier 1 capital instruments.

Please refer to the 2009 Nedbank Annual Report at for further details in this regard.

Shareholder analysis

Please refer to the 2009 Nedbank Annual Report at for further details in this regard.

A glimpse into the economic challenges faced by international operations in 2009

Fairbairn Private Bank
Low interest rates had a high impact on income available to clients, who were dependent on interest returns during 2009. Fears of continued bank failure, the crash of the UK property market, and the volatile stock market made 2009 a very challenging year for Fairbairn Private Bank (FPB). However, these challenges were adequately addressed through the promotion of discretionary multi-asset-class and bond portfolios, continued communication with clients, educational events for clients on property investments, and the launch of a low-volatility bond portfolio.

In 2009 the bank won Best International Wealth Manager at the International Investment Fund and Product Awards (in addition to the awards it garnered as Best International Private Bank Group and Best International Wrap Provider for 2008).

Fairbairn Trust Company (FTC) had similar challenges. Loss of value of investments due to the world recession, changes in the Guernsey Corporate Tax regime, and the loss of low-value entities as a result of the cost associated with trust structures were the main challenges. FTC steered towards an approved list of investments and safer forms of holdings, recommended diversification of banking counterparties and conducted the appropriate resilience for valued clients.

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