NEDBANK GROUP LIMITED results bOOklet · 2018. 5. 11. · Liability pricing and mix movements...

for the year ended 31 December 2014

NEDBANK GROUP LIMITED

results bOOklet

HEADLINE EARNINGS DILUTED HEPSFULL-YEAR DIVIDEND PER SHARE

▲14,0% ▲13,0% ▲14,9%R9 880 MILLION 2 066 CENTS 1 028 CENTS

COMMON- EQUITY TIER 1 RATIO

ROE (EXCL GOODWILL) NAV PER SHARE

▼11,6% 17,2% ▲9,5%(2013: 12,5%) (2013: 17,2%) 14 395 CENTS

CREDIT LOSS RATIO

▼79 bps(2013: 106 BPS)

2014 HIGHLIGHTS

Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive), DKT Adomakoh (Ghanaian), TA Boardman, BA Dames, GW Dempster*, MA Enus-Brey, ID Gladman (British), PB Hanratty(Irish), PM Makwana, Dr MA Matooane, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe, MC Nkuhlu* (Chief Operating Officer), JVF Roberts (British), GT Serobe, MI Wyman** (British).* Executive** Senior independent non-executive director

directOrs

cOntents

▲

Investor RelationsEmail: [email protected]

Raisibe Morathi • Chief Financial OfficerTel: +27 (0) 11 295 9693 Fax: +27 (0) 11 294 9693

Alfred Visagie • Executive Head, Investor RelationsTel: +27 (0) 11 295 6249 Email: [email protected]

For more inFormation contact:

Delivering value in a volaTilE macro EnvironmEnT

mike BrownChief Executive

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HigHligHTs and presentation

Financial results

risk and balancE sHEET managEmEnT review

‘nedbank group produced a strong set of results in 2014. Headline earnings growth of 14% was driven by good net‑ interest‑income growth and a lower credit loss ratio – despite strengthened central provisions and increased coverage levels.

We made a number of important changes during 2014 to position the group for continued growth into the future. our strong internal talent pipelines enabled us to implement a successful succession process in a number of executive roles. We also announced the creation of an integrated corporate and investment bank to enable better client

service and unlock additional revenue growth opportunities. our Pan‑african banking network strategy was strengthened through the investment of r5,9bn to secure a shareholding of approximately 20% in our longstanding alliance partner, Ecobank.

The group is resilient, with diversified income streams and strong balance sheet metrics, and is well positioned to continue to grow despite economic headwinds. although forecast risk remains high for the year ahead, we again expect organic growth in diluted headline earnings per share to be above nominal gdP growth.’

2a

Notes:

Notes:

A_Analyst Slides 2014_1-44 • 20 February 2015 7:23 PM

2

Delivering value in a volatile macro environment

STRATEGY & OVERVIEW MIKE BROWN


ANNUAL RESULTS

for year ended 31 December 2014

ANNUAL ResULts 2014NedbaNk Group

3a

Notes:

Notes:


4

Wholesale credit growth ahead of retail, but lower inflation to benefit consumers Wholesale credit growth ahead of retail (%)

Source: Nedbank Group Economic Unit

Consumers remain under pressure

Low inflation & interest rates lower for longer

-10

0

10

20

30

40

00 02 04 06 08 10 12 14

Households

Companies

SA Capex investment muted

0

250

500

750

93 95 97 99 01 03 05 07 09 11 13

Public sector

Private sector

CPI & Prime (%)

-10

-5

0

5

10

15

20

00 02 04 06 08 10 12 14

Consumer spending: Q-o-q changePersonal Disposable Income: Q-o-q change

-1

2

5

8

11

14

17

07 08 09 10 11 12 13 14 15 16 17

CPI (%)

Prime (%) Forecast

3

3,2 2,6

1,8 1,4

0

2

4

6

Aug 13 Feb 14 Aug 14 Feb 15

Nedbank 2014 GDP growth forecast

Growth currently slow in SA, but longer term opportunities in both SA & rest of Africa

Rest of Africa growing off a low base (IMF GDP growth forecasts, %)

SA GDP expectations revised downward

Global & local economy remains volatile, uncertain, complex & ambiguous

Source: Nedbank Group Economic Unit, IMF

2,2 1,4

2,1 2,5

5,2 4,8 4,9 5,2

0

2

4

6

13 14 15 16SA Sub Saharan Africa

Lower oil & commodity prices to play out

Volatility has increased

0

200

400

600

800

00 02 04 06 08 10 12 14

All Commodities IndexNonfood Agriculturals Price Index ($)Oil per barrel ($ indexed)

0

50

100

150

200

Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15

SA Banks indexJSE All Share indexNigerian Banks index

4a

Notes:

Notes:


6

STAFF Created 380 new permanent jobs in SA Top 3 corporate values of accountability,

client satisfaction & brand reputation align with strategy

High staff morale

COMMUNITIES

REGULATORS Strong capital, liquidity &

coverage ratios Commitment to

sustainable banking practices

One of SA’s largest tax contributors: R8,0bn

CLIENTS

New loan payouts R167bn AUM up 11% to R212bn

– top 3 rated SA fund manager Upgraded 174 ‘branch of the

future’ stores, 22 new outlets & 304 new owned ATMs

Total client numbers up 7% to 7,1m

Digitally enabled clients up 48% & value of AppSuiteTM transactions up 66% to R58bn

Fair Share 2030 pilot successes 2014 FT & Banker Magazine SA

Bank of the year

SHAREHOLDERS ROE (excl goodwill): 17,2% Full-year dividend of 1028c, up 14,9%

Invested R5,9bn to become a c20% shareholder in ETI (Ecobank)

Up to R8,2bn value created for SA BBBEE shareholders

Total shareholder return: 23,2%

Made banking more accessible & affordable Sourcing 87% or R8,5bn of our procurement locally Maintained level 2 BBBEE for 6th year & one of the

most transformed companies on the JSE For 9th consecutive year included in the Dow Jones

Sustainability Index Leader in socially responsible banking (African Banker

awards)

BY OUR:

TO BE AFRICA’S MOST ADMIRED

BANK

Delivering value to all stakeholders

5

9 83

1

10 7

53

11 7

21

13 1

43

14 3

95

2010 2011 2012 2013 2014

Continued focus on drivers of shareholder value creation

480 60

5 752 89

5

1 02

8

2010 2011 2012 2013 2014

13,4

15,3

16,4 17,2 17,2

14,2

13,0 13,1 13,0 13,5

2010 2011 2012 2013 2014

ROE (excl GW) Cost of equity

NAV per share (cents)

ROE & Cost of Equity (%)

Full-year dividend per share (cents)

NAV ROE > COE

9,5%

EP

Dividends

14,9%

Underpinned by solid CET1, surplus liquidity & high coverage


5a

Notes:

Notes:


8

Strategic positioning - 2014 a milestone year

Optimisation Initiatives

Retail & Business Banking back office optimisation

External cost optimisation review of Shared Services

SAP ERP implementation

Live on 1 Jan 2015 (Procurement & Finance)

HR module planned for Sept 2015 implementation

IT systems rationalisation – decommissioned a further 18 core systems in 2014 (74 since 2010 as we move from 250 to 60)

Old Mutual SA Group (OMSA, Nedbank & M&F) synergies on track for pre-tax run rate of R1bn in 2017

Strategic Choices

No fee increases, selected fee reductions & personal loans slowdown

Impacted NIR growth by ~3,5% in 2014

Well positioned to continue to grow our transactional banking franchise

7

Strategic positioning - 2014 a milestone year

Leadership & Board changes

Seamless Group Exco transition enabled by good succession planning & depth of leadership

Board appointments & scheduled retirements

Pan African Banking Network

Invested R6,3bn in the rest of Africa:

c20% shareholding in ETI (Ecobank)

Initial 36,4% shareholding in Banco Unico

Integrated Corporate & Investment Bank

Improve client service

Unlock future revenue growth opportunities

6a

Notes:

Notes:


10

Key performance indicators

2014 2013

ROE (excl goodwill) 17,2% 17,2%

Diluted HEPS growth 13,0% 15,0%

Credit loss ratio 0,79% 1,06%

NIR : expense ratio 82,8% 86,4%

Efficiency ratio1 56,5% 55,1%

Common equity tier 1 CAR 11,6% 12,5%

Dividend per share (cents) 1 028 895

Note 1: Efficiency ratio includes associate income

9

A strong performance across all clusters

FINANCIAL OVERVIEW RAISIBE MORATHI


7a

Notes:

Notes:


12

Full year ended (Rm)

% change

2014

2013

Net interest income 8,2 22 961 21 220

Impairments (19,0) (4 506) (5 565)

Income from lending activities 17,9 18 455 15 655

Non-interest revenue 4,9 20 312 19 361

Total expenses 9,4 (24 534) (22 419)

Indirect taxation 5,7 (635) (601)

Associate Income 106,4 161 27

Headline profit before taxation 14,4 13 759 12 023

Direct taxation 15,0 (3 487) (3 033)

Minorities & preference shares 22,5 (392) (320)

Headline earnings 14,0 9 880 8 670

Attributable earnings 13,4 9 796 8 637

Consolidated statement of comprehensive income

BOOKLET ONLY SLIDE

11

0,82% 0,99%

1,15% 1,23% 1,27%

1%

1%

1%

1%

1%

2%

2%

2%

4 900 6 184 7 483 8 670 9 880

2010 2011 2012 2013 2014

13,4%

15,3%16,4%

17,2% 17,2%

10%

11%

12%

13%

14%

15%

16%

17%

18%

19%

20%

4 year-CAGR: 19,2%

14,0%

Headline earnings (Rm)

ROE (excl. goodwill) Return on assets

Strong earnings growth trend, ROE & ROA uplift

8a

Notes:

Notes:


14

Cluster headline earnings & ROEs


ROE (%)

Year ended % change 2014 2013 2014 2013

Nedbank Capital 23,3 2 128 1 726 30,9 29,4

Nedbank Corporate 15,8 2 599 2 245 24,5 26,4

Nedbank Business Banking 17,8 1 094 929 20,1 19,4

Nedbank Retail 15,7 2 937 2 539 13,3 11,6

Nedbank Wealth 15,8 1 042 900 36,8 36,2

Rest of Africa Division 106,4 357 173 10,1 8,7

Line clusters 19,3 10 157 8 512 19,7 18,7

Centre >(100,0) (277) 158

Group 14,0 9 880 8 670 15,8 15,6

Group (excl goodwill) 17,2 17,2

BOOKLET ONLY SLIDE

13

8 670 8 670

11 470

9 880 9 880

1 741

1 059

951 2 115

134 560

2013 NII Impairments NIR Expenses AssociateIncome

Direct tax &other

2014

Headline earnings growth drivers


14,0%

8,2%

(19,0%)

4,9%

9,4%

>100%

Excluding ETI 13,4%


9a

Notes:

Notes:


16

% of daily average interest-earning banking assets % Rm

December 2013 3,57 21 220

Growth in banking assets - 2 051

Asset margin pricing & mix movements (0,15) (998) Impact due to pricing (0,03) (188) Impact due to mix change (0,12) (810)

Endowment 0,10 662 Capital 0,02 138 Deposits 0,08 524

Liability pricing and mix movements (0,01) (61) Change in marginal cost of funding 0,00 19 Cost of enhancing liquidity risk profile (Basel III) 0,00 4 Liability pricing and mix (0,01) (84)

Other 0,01 87 December 2014 3,52 22 961

NII – margin analysis BOOKLET ONLY SLIDE

15

1 726 2 245 929

2 539

900 173 2 128 2 599

1 094

2 937

1 042 357

Capital Corporate Business Banking Retail Wealth Rest of AfricaDivision

29,4 26,4 19,4

11,6

36,2

8,7

30,9 24,5 20,1

13,3

36,8

10,1

Capital Corporate Business Banking Retail Wealth Rest of AfricaDivision

2013 2014

23,3%

15,8%

17,8%

15,8%

Strong performance across all clusters


ROE (%)

106,4%

15,7%

Note: Cost of equity 2013: 13,0%, 2014: 13,5%

10a

Notes:

Notes:


18

Average Interest Earning Asset mix contribution driving change in NIM

34,9 33,7 32,5 30,4

44,9 46,3 45,6 47,7

16,6 16,4 16,2 16,6

3,6 3,6 5,7 5,3

2011 2012 2013 2014

Retail WholesaleBusiness Banking Other

5,41% 5,68% 5,81% 5,91%

1,82% 1,88% 1,89% 1,90%

3,29% 3,20% 3,24% 3,24%

3.48% 3.53% 3,57% 3,52%

2011 2012 2013 2014

Retail WholesaleBusiness Banking Group

Contribution to AIEA (%) Net interest margin (%)

100% 100% 100% 100%

Note: Wholesale includes Nedbank Corporate & Nedbank Capital | Other represents the balance of AIEA

17

Net interest margin: endowment benefit more than offset by asset mix & pricing

Net interest margin (bps)

357 352

10

(3) (1) 1

(12)

2013 Endowment oncapital &deposits

Asset mix &pricing

Liability marginpricing & mix

Prime/Jibarreset & Other

2014

(15)

Mix

Pricing


11a

Notes:

Notes:


20

Lower CLR reflective of quality portfolio & reduction in higher risk portfolios

136 113 105 106

79

118 89

59 55 46

Group CLR (bps)

Group CLR excl. PLs (bps)

Impairment charge (Rm)

2010 2011 2012 2013 2014

Personal loans Homeloans Wholesale Other

6 188

4 506

Group credit loss ratio (bps)

19

CLR (%)

% of avg

banking

advances

FY

2014

H2

2014

H1

2014

FY

2013

Through-the-

cycle target

ranges

Nedbank Capital 12,8 0,14 0,32 (0,04) 0,51 0,10 – 0,55

Nedbank Corporate 33,1 0,21 0,21 0,22 0,23 0,20 – 0,35

Nedbank Business Banking 11,4 0,42 0,39 0,44 0,65 0,55 – 0,75

Nedbank Retail 36,0 1,70 1,50 1,90 2,16 1,90 – 2,60

Nedbank Wealth 4,2 0,17 0,13 0,21 0,28 0,20 – 0,40

Rest of Africa 2,6 0,23 0,06 0,42 0,37

Group 0,79 0,74 0,83 1,06 0,80 – 1,20

Credit loss ratio BOOKLET ONLY SLIDE

12a

Notes:

Notes:


22

Non-interest revenue

Full year (Rm)

% change

2014

2013

Commission & fees 3,9 14 570 14 023 Insurance income 3,1 1 986 1 927

3,8 16 556 15 950 Trading income 3,3 2 648 2 564 Private equity income 88,0 423 225 Other income 11,7 650 582

4,9 20 277 19 321 Fair value adjustments (12,5) 35 40

Credit spread on Nedbank bonds (38) (6) Designated asset & liability hedged portfolios 73 46

4,9 20 312 19 361

BOOKLET ONLY SLIDE

Note: Other income includes investment & sundry income

21

Defaulted advances declining & coverage increasing

Defaulted advances (Rm) Defaulted advances as % of book (%)

33,9% 37,7% 38,6% 42,3% 43,1%

5 523 5 701 6 692

5 867 5 808

763 641 866 888 941

2010 2011 2012 2013 2014

Total & specific coverage (%)

Write-offs (Rm)

Post write-off recoveries (Rm)

70,0% 64,2% 56,4% 49,5% 41,9%

Note: 2013 Total & specific coverage restated

26 7

65

23 2

10

19 2

73

17 8

48

15 8

46

2010 2011 2012 2013 2014

(11,2%)

9,1%

5,6%

4,8% 3,1%

1,6% 1,3%

5,5%

3,0% 2,5%

Retail Wholesale Nedbank Group


13a

Notes:

Notes:


24

Strong growth in H2 2014, supported by good volume growth

(0,6)

10,2

2,9 4,8

(3,5)

9,4

1,3

5,3

1,3

H1 2014 H2 2014

NIR Commission & fees Insurance Trading Other NIR

NIR growth (%)

160,3

4,9%

23

19 361 19361

19908 19967 20051 20249 20 312 547

59 84 198

63

2013 Comm. & fees

Insurance Trading Privateequity

Otherincome

2014

NIR (Rm)

72%

10%

13%

5%

Comm. & fees Insurance incomeTrading income Other income

43%

8% 11%

16%

17% 5%

Retail BB CorporateCapital Wealth Other

Non-interest revenue drivers

Contribution (%) Contribution

Product

Cluster

88,0% 3,9% 3,1% 3,3% 10,1%

4,9%

82,8%

86,4%

NIR : expenses ratio

14a

Notes:

Notes:


26

Expenses

Full year ended (Rm)

% change

2014

2013

Staff costs 9,6 13 838 12 629

Remuneration & other staff costs 8,8 11 132 10 242

STI 14,6 2 100 1 833

LTI 7,4 595 554

Computer processing 13,9 3 097 2 720

Marketing & PR 4,5 1 517 1 451

Fees & insurance 10,7 2 260 2 042

Other 6,8 3 822 3 577

Total operating expenses 9,4 24 534 22 419

…efficiency ratio 56,5% (FY 2013: 55,2%)

BOOKLET ONLY SLIDE


25

19 361

20 045

2013 PL slowdown& Credit life

Maintain fees at 2013levels & selected

reductions

2014

329

355

Credit life pricing & benefits PL volume

Selected fee reductions

0% fee increases

Non-interest revenue impacted by strategic choices

3,5%

NIR (Rm)

1,7%

1,8% NIR : expense ratio

impact of 2,8%


15a

Notes:

Notes:


28

Year ended (Rm) Annualised% change 2014 2013

Cash & securities 12,9 122 661 108 615

Advances 5,8 613 021 579 372

Other 19,5 73 631 61 607

Total assets 8,0 809 313 749 594

Ordinary shareholders’ equity 10,6 67 024 60 617

Minorities & preference shareholders 4,5 3 887 3 719

Deposits 8,4 653 450 602 952

Long-term debt instruments 7,1 35 638 33 268

Other 0,6 49 314 49 038

Total equity & liabilities 8,0 809 313 749 594

Consolidated statement of financial position

…Strengthened loan-to-deposit ratio to 93,8% (2013: 96,1%)

27

22 419

24 534

901

377

66 218

245

308

2013 StaffCost

ComputerProcessing

Marketing&

PR

Fees&

Insurance

Other 2014

9,4%

Expenses growth led by investment in franchise, volume-driven growth & cost optimisation

Expenses (Rm) Key initiatives

Continued investment in the franchise - Electronic & physical

channels

- Regulatory requirements

- Rest of Africa expansion

Group wide synergies - R&BB back office

integration

- Cross cluster optimisation programmes

- SAP ERP programme

- Rationalise, standardise & simplify IT strategy

Incentives

Staff costs

9,6% 13,9% 4,5% 10,7%

16a

Notes:

Notes:


30

Advances up 5,8% – aligned to portfolio tilt

Advances (Rbn) Contribution (%)

YoY Growth (%)

10,8

0,9

15,0

(13,2)

16,3

Other

Tradingadvances

Credit cards

Vehicle finance

Other term loans(wholesale)

Personal loans

Commercialmortgages

Home loans

2014 2013

17,2

22,0%

19,8%

2,9% 2,1%

14.1%

15,1%

6,1%

18,0%

HL Comm PropPL CardOther term loans VAF/MFCONL & Overdrafts Other

(28,0)

5,4

Note : Other advances include Overdrafts, Overnight loans | Note 1 includes other types of asset-based finance

1

29

Year ended (Rm) Annualised% change 2014 2013

Home loans 0,9 137 449 136 156 Commercial mortgages 16,3 123 652 106 325 Properties in possession (22,8) 596 772 Term loans 8,9 106 175 97 528

Personal loans (13,2) 18 346 21 145 Other term loans 15,0 87 829 76 383

Leases & instalment sales 10,8 94 237 85 038 Credit cards 17,2 13 404 11 441 Overnight loans 20,7 21 638 17 927 Overdrafts 7,3 16 141 15 048 Other (8,1) 110 824 120 593

Banking advances 83 876 83 163 Trading advances 26 948 37 430

Impairment of advances (3,2) (11 095) (11 456) 5,8 613 021 579 372

Advances BOOKLET ONLY SLIDE


17a

Notes:

Notes:


32

15,5%

10,8%

4,6%

9,3%

6,5%

39,4%

13,9%

Other NCDsForeign currency Cash managementFixed Call & termCASA

Deposits up 8,4% – growing quality deposits

Deposits (Rbn)

Contribution (%) YoY

Growth (%)

>100

11,3

7,5

11,8

8,5

Other

NCDs

Foreign currency

Cashmanagement

Fixed deposits

Call & termdeposits

Current & savingsaccounts

2014 2013

(19,5)

Note : Other deposits include overnight loans & deposits placed under repurchase agreements

31

Deposits

Period ended (Rm) Annualised% change

2014

2013

Current accounts 11,0 65 170 58 704

Savings accounts 12,2 25 386 22 631

Term deposits & other 10,3 449 705 407 593

Call & term deposits 8,5 257 634 237 393

Fixed deposits 11,8 42 800 38 289

Cash management deposits 7,5 60 820 56 571

Other deposits 17,4 88 451 75 340

Foreign currency liabilities >100 30 153 14 309

NCDs (19,5) 70 377 87 457

Deposit repurchase agreements 3,3 12 659 12 258

8,4 653 450 602 952

BOOKLET ONLY SLIDE

18a

Notes:

Notes:


34

Continued growth momentum

NEDBANK CORPORATE MFUNDO NKUHLU

33

41,7 45,6

69,7 82,6

2013 2014

Required Statutory Liquid Assets & Cash Reserves

Total Qualifying Statutory Liquid Assets & Cash Reserves

12,5

11,6

2,4 1,2

1,2

0,9

Dec2013

Generationof

reserves

Dividends Increasein RWA

Impact ofinvestments

Dec2014

Capital Only 2015

Balance sheet metrics remain sound

Common equity tier 1 ratio (%)

Liquidity & funding

R2,5bn Basel III compliant tier 2 capital subordinated debt issued

R1,7bn old-style tier 2 capital subordinated debt redeemed in 2014

Basel III target range: 10,5% -12,5%

Additional Tier 1 & Tier 2 capital

Qualifying statutory liquid assets (Rbn)

Min. 60% LCR exceeded from 1 January 2015

Ave. Q4 LT funding ratio: 25,4% (ahead of industry average)

R4,5bn senior unsecured debt issued

NSFR remains work in progress


19a

Notes:

Notes:


36

Segmental analysis BOOKLET ONLY SLIDE

* Other includes Nedbank Investor Services, International Financial Institutions, Transactional Banking, Corporate Shared Services & Central costs


ROE (%)

Average banking advances

(Rbn)

Year ended %

change 2014 2013 2014 2014 %

change

Corporate Banking 1,1 1 210 1 197 23,5 85 933 5,6

Property Finance 39,5 1 318 945 27,5 99 644 18,1

Subtotal 18,0 2 528 2 142 25,5 185 577 11,9

Other* (31,1) 71 103 10,5 2 694 32,1

Nedbank Corporate total 15,8 2 599 2 245 24,5 188 271 12,2

35

Nedbank Corporate – financial highlights

Year ended %

change 2014

2013

Headline earnings (Rm) 15,8 2 599 2 245

Operating income (Rm) 14,8 5 838 5 084

Preprovisioning operating profit (Rm) 16,5 3 836 3 294

Margin (%) 2,06 2,03

Credit loss ratio (%) 0,21 0,23

NIR : expense ratio (%) 93,7 89,7

Efficiency ratio (%) 38,6 39,6

Average banking advances (Rm) 12,2 188 271 167 817

Average deposits (Rm) 8,8 181 251 166 658

Allocated economic capital (Rm) 24,6 10 606 8 514

Headline economic profit (Rm) 2,5 1 167 1 138

ROE (%) 24,5 26,4

Nedbank Corporate

Assets

Other clusters

Headline earnings

26%

74%

26%

74%

20a

Notes:

Notes:


38

HE at R1 318m (up 39,5%); ROE at 27,5%

NII growth largely driven by lending volumes due to strong advances growth

Market share 34% (Group 41%)

CLR at 0,21%; LTV<50%

NIR boosted by growth in property investment income of R602m, offset by a FV loss of R24m

Low efficiency ratio - improved to 25,1%

Exceptional & long-standing client relationships

Property Finance – another strong performance

Maintained market leadership position

NII (Rm)

1 432 1 461 1 470 1 499

1 770

2010 2011 2012 2013 2014

18,1%

Property Investments (Rbn) 3,1 2,7

Property Investment NIR (Rm)

76 (78)

126

(24)

163

680

-200

0

200

400

600

800

2013 2014 2013 2014

239

602

Fair Value NIR (Rm)

Realised

Unrealised

37

Corporate Banking – good returns despite flat earnings NII (Rm)

1 311 1 567

1 877 2 059

2 242

2010 2011 2012 2013 2014

697 746 834 957

1 077

2010 2011 2012 2013 2014

Core NIR (Rm)

8,9%

12,5%

HE at R1 210m; ROE at 23,5%

Advances growth of 5,6% in an intensely competitive market

Deposits increased 8,9%

Impairments up R37m off a low base. Defaulted advances 0,85% of portfolio

Core transactional NIR growing 12,5% - cash (22% up), electronic banking (13% up) & global trade (9% up)

Negative y-o-y fair-value movement of R76m

Expenses increased due to higher transactional volumes

Well rated on client service

Earnings flat in a slowed growth environment

. Core NIR = NIR less fair value income


21a

Notes:

Notes:


40

Strong performance across all businesses

NEDBANK CAPITAL BRIAN KENNEDY

39

Strong platform for integration Strong growth momentum (Headline earnings CAGR of 17,6% since 2010)

Market leader in Property Finance (34% market share, Group 41%)

Highly rated on levels of client services

Advanced & highly-competitive transactional banking offering

120 transactional client gains since 2010

Quality book (CLR at 21bps at the lower end of target range)

Highly engaged staff (entropy at worldclass levels)

Consistent contributor to group earnings

22a

Notes:

Notes:


42

0%

1%

2%

3%

4%

0%

100%

200%

2010 2011 2012 2013 2014South Africa Outside South AfricaLending Margin (RHS) CLR (RHS)

Exporting sector expertise to help develop the African continent together with our clients

Deal activity in 24 countries across Africa IB average loans & advances NIM & CLR (%)

IET1 average loans & advances (Rbn) GOI (Rm)

Resource Finance average loans & advances (Rbn) GOI (Rm)

-

300

600

0%

100%

200%

2010 2011 2012 2013 2014South Africa Outside South AfricaRevenue (RHS)

-

400

800

0%

100%

200%

2010 2011 2012 2013 2014South Africa Outside South AfricaRevenue (RHS)

Note 1: IET – Infrastructure, Energy & Telecommunications

41

Nedbank Capital – financial highlights

Year ended %

change Dec

2014 Dec

2013









Headline economic profit (Rm) 24,4 1 198 963


ROE (%) 30,9 29,4

Nedbank Capital

Assets

Other clusters

Headline earnings

22%

78%

21%

79%


23a

Notes:

Notes:


44

Nedbank Corporate & Investment Bank – powerful, scalable client facing wholesale business

Nedbank Corporate & Investment Bank

Relationship management & client coverage

Tran

sact

iona

l Ser

vice

s

Fina

ncin

g &

adv

isor

y

Mar

kets

Pro

perty

fina

nce

Strategic partners: Ecobank, Banco Único, Bank of China, CIBC

Rationale Combines the respective strengths of Nedbank Capital & Corporate to build a market leading franchise with a stronger client-centred focus

Combined headline earnings (Rm) & ROE (%)

1 202 1 228 1 431 1 726 2 128

1 496 1 571 1 817

2 245 2 599

21,7% 23,6% 23,7%

27,6% 27,0%

0%

5%

10%

15%

20%

25%

30%

0

1 000

2 000

3 000

4 000

5 000

6 000

2010 2011 2012 2013 2014

Capital Corporate ROE

2 698 2 799 3 248

3 971

4 727

43

Markets income distribution

Market business – focusing on flow

Trading revenue (% change yoy)

2012 2013 2014

Value at Risk(1) (Rm) 14,7 6,6 10,7

Days profit (%) 90% 96% 98%

Note 1: Average VaR (99%, one day)

0%

10%

20%

30%

40%

50%

<-25

-20

to -1

5

-15

to -1

0

-10

to -5

-5 to

0

0 to

5

5 to

10

10 to

15

15 to

20

20 to

25

25 to

30

30 to

35

>35

% o

f tra

ding

day

s FY 2012FY 2013FY 2014

Value at risk

2012 2013 2014

Forex Debt securitiesEquities Commodities

2 263 2 347 2 404

(1,2%)

4,2%

24a

Notes:

Notes:


46

Strong strategic momentum with improving risk profile

NEDBANK RETAIL & BUSINESS BANKING PHILIP WESSELS

45

Prospects for Corporate & Investment Bank

Transactional services pillar to focus on client growth & retention, & extract synergies though collaboration & cross-sell across the group

Grow transactional banking franchise

Support functions to be centralised, eliminating duplication, ensuring prudent management of costs & investment in integrated systems to enhance business productivity & regulatory compliance

Optimise & invest

Capture opportunities in rest of Africa utilising our sector expertise & offering holistic solutions as our client expand into the rest of Africa, in conjunction with working closely with our strategic partners

Pan-African banking network

Client coverage & relationship team to create focus to ensure that our clients are at the centre of our wholesale universe by offering a full spectrum of products & solutions

Client-centred innovation

Utilise the power of our balance sheet to originate & lead ‘big-ticket’ sector deals, whilst capturing all of the opportunities available across the group

Strategic portfolio tilt


25a

Notes:

Notes:


48

Nedbank Business Banking – financial highlights

Year ended %

change 2014

2013

Headline earnings (Rm) 17,8 1 094 929



Margin (%) 3,24 3,24


NIR : expenses ratio (%) 50,5 55,4





Headline economic profit (Rm) 16,2 358 308

ROE (%) 20,1 19,4

Assets

Headline earnings

14%

86%

11%

89%

Nedbank Business Banking Other clusters

47

16% increase in headline earnings to R4bn

41bps improvement in CLR to 139bps

Significantly lower defaults – down 10,7% to R12bn, with highest ever total coverage of 3,2%

Muted NIR growth of 1,5%

ROE of 14,6%

Resilient performance

…driven by strategic choices

Assets

40%

60%

41%

59%

Headline earnings

Nedbank Retail & Business Banking Other clusters

Proactive de-risking of business & prudent provisioning

No fee increases & selective reductions benefitting clients

Consistent investment for sustainable growth - distribution, marketing & innovation

Active cost management

Nedbank Retail & Business Banking – highlights

26a

Notes:

Notes:


50

NIR growth muted by macro factors & strategic choices…

Low growth economy impacting overall business volumes

R120m in NIR through selective price reductions, benefiting long term growth (adding 6,9% to NIR)

…with sustained momentum in client growth & cross-sell

Maintained high level of quality client gains over the past five years

4,9% increase in product holding

NIR growth muted by no fee increases & selected fee reductions NIR growth

#

Rm

Net new primary banked clients

1 342 1 486 1 578 1 729 1 710

2010 2011 2012 2013 2014

(1%)

601 748 775 965

752

2010 2011 2012 2013 2014

49

Maintaining strong momentum in quality advances & deposit growth Average deposits excl CAC

Balances, Rbn

1 Restated for rule refinements

Avg. Current Account Creditors (CAC)

Asset payouts

Credit Loss Ratio

9,8 10,7 12,1 13,5 14,7

2010 2011 2012 2013 2014

+9%

40 53 34

65 42

2010 2011 2012 2013 2014

bps

12,0 16,8 19,1 22,9 23,3

2010 2011 2012 2013 2014

Rbn Balances, Rbn

67,1 71,7 74,9 77,6 87,6

2010 2011 2012 2013 2014

+13%

1


27a

Notes:

Notes:


52

647 717 831

2 636 2 971 3 227

3 577 3 837

3 905

1 102 1 126

857

2012 2013 2014

5 566 6 152 6 675

328 271

213

2012 2013 2014

Client & NIR growth influenced by risk appetite & pricing choices

1 Single product clients 2 Adjusted for MFC client migration 3 Total growth excluding personal loans. 2014 Includes the impact of selected fee reductions (R40m) & no price increases (R195m)

#000 Rm

Card

Trans- actional

Secured

Personal Loans

8 651 8 820 6 888

6 423

+7,2% +9,0% 7 962

Personal Loans1

Total Client Base NIR

Retail excl Personal Loans1

+10,5% +8,5%

Total

Total

+2,0% +8,7%

+9,2%3

+9,7%3

5 894

2

51

Nedbank Retail – financial highlights

Year ended %

change 2014 2013



Preprovisioning operating profit (Rm) (4,1) 7 572 7 897

Margin (%) 5,91 5,81


NIR : expenses ratio (%) 69,5 73,9





Headline economic profit (Rm) 84,4 (48) (308)

ROE (%) 13,3 11,6

Assets

Headline earnings

26%

74%

30%

70%

Nedbank Retail Other clusters

28a

Notes:

Notes:


54 1 Client premium relative to prime with home loans excluding staff & re-advances

Asset pay-outs aligned to risk appetite & pricing dynamics

YoY % Rbn %

2,42 2,49 2,36 2,41 2,30 2,43

0,48 0,51 0,65 0,84 0,70 0,57

H1 H2 H1 H2 H1 H2

MFC

Home Loans

Personal Loans

Other

2012 2013

0,5 0,8 0,7 0,7 0,6 1,1 4,7 4,9 5,3 6,1 5,6

7,5

12,1 14,0 14,7

15,9 15,0 16,6

8,0 7,5 5,1

4,1 3,6

3,9 25,4 27,1

25,8 26,8 24,7

29,1

H1 H2 H1 H2 H1 H22014 2012 2013 2014

11,2 13,0 14,9 17,5 17,6 16,9

Asset payouts Book growth New business pricing1

12,1

1,0

(16,3)

53

Client-centred strategy driving growth in all segments

Total client base, # 000

Kid

s &

You

th

Ent

ry L

evel

1 M

iddl

e 1,

2

Pro

fess

iona

l2 S

mal

l Bus

ines

s

1 000 944

3 629 3 307

2013 2014

1 736 1 662

79 87

215 224

2014 2013

1 ELB and Middle segment growth is negatively impacted by reduction in Personal Loans 2 Bases readjusted due to Professional’s migration to Consumer segments in Feb’14 of ~6k Note: Non-residential, Non-individual segment not shown

+6%

+10%

+4%

+10%

+4%


29a

Notes:

Notes:


56

Underlying business showed an improved performance & contributed to Retail’s growth

1 Profitability relates to the advances book & excludes some transactional, deposit & insurance income derived from strong Personal Loans positioning in the market 2 Excludes lending products in RRB

Headline Earnings

Personal Loans1

Card

Rm

413 432 624

MFC2 1 193 1 152 1 134

Home Loans2 153 308 485

RRB 161 222 323

2012 2013 2014

778 859 863

12,2 11,2 17,9

18,0 15,9 15,7

3,6 7,8 12,4

7,9 11,4 15,1

2012 2013 2014

28,8 30,9 28,2

ROE %

55

0%

5%

10%

15%

20%

Home Loans Personal Loans VAFMFC Card Retail TotalHL Back HL Front Prime

H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 2006 2007 2008 2009 2010 2011 2012 2013 2014

Defaults reducing across all asset class

2005

Defaults by asset class % of total advances

30a

Notes:

Notes:


58

Strong growth & momentum off a high base

NEDBANK WEALTH DAVE MACREADY

57

2015 run-rate impact of selective fee reductions

Continued investment in physical & digital distribution

Cost optimisation

Focus on simplifying client on boarding & ongoing service

Building sustainable, profitable businesses through the cycle

Prospects for Retail & Business Banking

Innovative, competitively priced products

Vastly improved distribution channels

Quality advances supported by proactive risk management

Momentum in client gains & cross-sell

Operating environment

Strategic choices

Strong fundamentals

Constrained by economic fundamentals

Regulatory changes & enhanced compliance

Heightened competition not only from banks


31a

Notes:

Notes:


60

NIR increased by 10,3% to R3,4bn

Highlights & KPI’s

Wealth Management Asset Management Insurance

Relative divisional NIR contribution & growth

2013 2014

WM Asset Management Insurance

10,6%

11,0%

9,8%

59

Nedbank Wealth – financial highlights

Year ended %

change Dec

2014 Dec

2013

Headline earnings (Rm) 15,8 1 042 900

Operating income (Rm) 12,2 3,986 3,553

Pre-provisioning operating profit (Rm) 12,1 1,441 1,286

Margin (%) 1,94 1,93




Assets under management (Rm) 11,4 212 013 190 341

Life embedded value (Rm) 12,0 2 393 2 137

Life value of new business (Rm) (27,0) 257 352


Headline economic profit (Rm) 14,4 660 577

ROE (%) 36,8 36,2

Nedbank Wealth

Headline earnings

Other clusters

AUM net inflows R8,5bn

Life APE (22,6%)

ST GWP +2,5%

11%

89%

32a

Notes:

Notes:


62

Asset Management – scale & momentum

Top 3 Raging Bull company

Strong netflows internationally

Leading in passive

Momentum in Best of Breed™

Excellent fund performance

Investment in mobile, digital & brand

Operational overview Assets Under Management (Rbn)

Net flows (Rbn)

9,8 6,5

24,4

15,5

8,5

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014

International Local

212,0 190,3

150,5

112,2 102,6

61

-2 000 000

3 000 000

8 000 000

13 000 000

18 000 000

23 000 000

2

5 000 002

10 000 002

15 000 002

20 000 002

25 000 002

30 000 002

2010 2011 2012 2013 2014Liabilities Advances

Wealth Management – strong performance & growth

Record YoY HE growth

Strong growth in banking

Record growth in AuA

Momentum in Financial Planning

Top quartile performance

Single, integrated international HNW proposition

Operational overview

+27,8%

+13,3% Wealth Management: Liabilities & Advances

+3,3% +36,7%

45678910111213

20

30

40

50

60

70

80

90

100

110

2010 2011 2012 2013 2014

+36,7%

Stockbroking AuA


33a

Notes:

Notes:


64

Prospects

Growth in new clients & NCCF

Investment in specialist IP & capacity

Strong traction in single integrated proposition

Wealth Management

Grow international, wholesale & passive

Maintain excellence in long-term performance track record

Continued momentum in BoB & Cash

Asset Management

Refocus to simple bancassurance

Investment in Nedbank Insurance brand profile

Systems & solutions

Insurance

Broaden our financial services franchise

Increasing cross-sell opportunities

Leverage group collaboration

Overall Nedbank Wealth

63

0

100

200

300

400

500

600

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013 2014

+12,0%

Insurance – back to basics

Rebasing of traditional volumes

Strong growth in funeral & niche offerings

Launch of Green Property Fund

Innovation in mobile & digital

Investment in a single client centric system

Operational overview Life EV & VNB (Rm)

Short-term GWP (Rm) & claims ratio (%)

Embedded value Value of new business

+10,

7%

Gross written premium Claims ratio

50,0% 47,1%

31%

36%

41%

46%

51%

56%

61%

2010 2011 2012 2013 20140

200

400

600

800

1000

1200

+2,5%

(27,0%)

34a

Notes:

Notes:


66

Building our pan-African banking network & governance structures

A client-centred, risk-mitigated, capital-efficient, longer-term strategy

SADC & East Africa (A) Grow presence from 6 to 10 countries in the

medium-term Standardised operating model & IT system Banco Unico (Mozambique): acquired 36,4%

stake for R252m (with pathway to control) Coverage bankers in East & West Africa West & Central Africa (B) Acquired 20% equity stake in ETI for $493m

in October 2014 Ecobank strengthening its franchise

‒ Presence in 36 countries ‒ #1 in 6, top 3 in 14 countries ‒ New Board, Chairman & CEO

70 Nedbank wholesale banking clients now bank with Ecobank ‘One bank’ experience for clients across 39 countries & >2 000 staffed outlets

65

Building our Pan-African Banking Network

REST OF AFRICA DIVISION GRAHAM DEMPSTER


35a

Notes:

Notes:


68

SADC & East Africa banking subsidiaries

Financial performance

Continued investment in the franchise

new senior executives

added 5 branches (& 17 from Banco Unico)

increased IT spend

Increased economic capital allocation (change in methodology) – impacting ROE

Strong advances growth, up 17%

Increasing margin

CLR remaining flat at 39bps underpinned by an improved risk profile

Solid NIR growth of 8,8%

165

224

13,5%

10,3%

0

2

4

6

8

10

12

14

16

0

50

100

150

200

250

300

2013 2014

Headline earnings (Rm) ROE (%)

35,8%

Key drivers

67

Rest of Africa division - financial highlights

Year ended %

change 2014

2013

Headline earnings (Rm) 106,4 357 173


Preprovisioning operating profit (Rm) 66,2 477 287

Margin (%) 4,75 4,66



Efficiency ratio1 (%) 69,2 76,3




Headline economic profit (Rm) (40,2) (122) (87)

ROE (%) 10,1 8,7

Rest of Africa division

Assets

Other clusters

Headline earnings

3%

97%

4%

96%


36a

Notes:

Notes:


70

Prospects

SADC & East Africa banking subsidiaries

Rest of Africa division

Increase market share & revenues

Explore expansion opportunities in SADC & East Africa

Flexcube IT system implementation in 2015

Deepen & strengthen our level of activity & technical services to enhance value propositions for clients

All clusters have roles & a contribution to make to increase the value of the investments

Risks arising from political, social & economic factors (lower oil price & currencies)

Strategic Associate

investments

Continue adding management capability & investing in our people to embed a culture of client centricity

Leverage off & collaborate with the greater Nedbank Group

Targeting ROE of well above Nedbank Group cost of equity

69

Q4 2014: Nedbank has made its own associate earnings accrual for Q4 2014 on a prudent mechanical basis as ETI reports after Nedbank

Future accounting: Report earnings from ETI a quarter in arrears

ETI attributable income for 9 months to 30 September 2014

$277m

Average of first three quarters $92,3m

Nedbank shareholding in ETI c20%

Q4 2014 Rand : US$ exchange rate 11,23

Associate income for 3 months to 31 Dec 14 after Nedbank prudency discount

R146m

Funding of investment carried in NII (R99m)

Strategic Associate investments

8

133

-10

10

30

50

70

90

110

130

150

2013 2014


Financial performance Equity accounting ETI

Invested to become c20% ETI & 36,6% Banco Unico shareholder

ETI investment (31 Dec 2014): Cost: R5,9bn Book value: R6,2bn Market value: R5,5bn

Entry price of less than 1,0x NAV Long-term strategic shareholding &

alliance


37a

Notes:

Notes:


72

Macro & industry environment

Global macro

environment

Domestic macro

environment

SA banking industry

2015 GDP growth: 2,5% with downside risk

Inflation to remain below 6%

Repo rate lower for longer: 25bps increase forecast in November 2015

Consumers highly indebted but some potential relief from lower inflation Electricity constraints continue to impact business confidence

Mixed outlook for developed economies

Emerging market volatility likely to continue Impact of oil & commodity prices to play out

Rest of Africa higher growth trajectory intact, but short term volatility

Low asset growth (wholesale > retail) & margin pressure

Corporate volumes holding up

Consumer advances & transactional volume growth to remain muted

Focus on bank fees, interchange remain

Capital market volatility to continue

Regulatory change remains intense

71

Nedbank Group in good shape for a volatile & uncertain environment

SUMMARY & PROSPECTS MIKE BROWN

38a

Notes:

Notes:


74

THANK YOU

73

2015 guidance

Advances to grow at mid-single digits

Margin below the 2014 level NII

At the lower end of our target range of 80 – 120bps

Above mid-single digit growth (excluding fair-value adjustments)

Above mid-single digit growth

CLR

NIR

Expenses

Volatile economic environment

Forecast risk increased

Building our franchise for the long-term

Growth in DHEPS greater than growth in nominal GDP DHEPS growth


39a

Notes:

Notes:


76

Key trends over time

477 499

527 579

613

2010 2011 2012 2013 2014

492 524

551 603

653

2010 2011 2012 2013 2014

3,36

3,48 3,53

3,57 3,52

2010 2011 2012 2013 2014

1,36 1,13 1,05 1,06

0,79

2010 2011 2012 2013 2014

79,6 81,5

84,2 86,4

82,8

2010 2011 2012 2013 2014

55,7 56,6 55,6 55,2 56,6

2010 2011 2012 2013 2014

Advances (Rbn): 6,5% CAGR Deposits (Rbn): 7,3% CAGR NIM (%): +16bps

CLR (%): -57bps NIR : expenses (%): +320bps

Efficiency ratio (%): +90bps

BOOKLET ONLY SLIDE

75

Medium-to-long-term targets

Metric 2014 Medium-to-long-term

target 2015 outlook1

ROE (excl goodwill) 17,2% 5% above COE Below target

Diluted HEPS growth 13,0% ≥ CPI + GDP growth + 5% > CPI + GDP growth

Credit loss ratio 79bps 80 – 120 bps At the lower end of our target range

NIR : expenses 82,8% > 85% Below target

Efficiency ratio2 56,5% 50% - 53% Above target

CET 1 CAR Tier 1 CAR Total CAR

B III 11,6% 12,5% 14,6%

Basel III basis: 10,5% - 12,5% 11,5% - 13,0% 14,0% - 15,0%

Within target range

Dividend cover 2,07 1,75 to 2,25 times

BOOKLET ONLY SLIDE

1 2015 outlook based on current economic forecasts 2 Efficiency ratio includes associate income & going forward this target will be reviewed in line with this change

40a

Notes:

Notes:


78

Nedbank Retail Building more enduring client relationships through increased levels of transactional products cross-sell

3,4

10,5

5,2

(11,4)

0,1

Card

Personal Loans

MFC

Home Loans

Total Retail clients as at Dec’14

Investments

% YOY Growth

TP 5,4

1,9

11,1

4,7

(15,6)

(2,4)

9,8

326

546

555

1,034

1,193

5 358

% YOY Growth

# ‘000

Transactional clients with product line

914

77%

827

77%

497 523

51% 50%

46%

257 290

44%

128 124

23% 23%

121

36% 37%

121

2014

1,459

27%

2013

1,385

28%

H2

Number of product line clients with transactional products

77

Full year ended

% change

2014

2013


Economic profit (Rm) (0,1) 2 112 2 114

HEPS (cents) 12,9 2 127 1 884

Diluted HEPS (cents) 13,0 2 066 1 829


ROA (%) 1,27 1,23

ROE (excluding goodwill) (%) 17,2 17,2

ROE (%) 15,8 15,6

Tangible NAV per share (cents) 10,6 12 553 11 346

Assets under management (Rbn) 11,4 212,0 190,3

Common equity Tier 1 capital ratio (%) 11,6 12,5

Dividend per share (cents) 14,9 1 028 895

Financial highlights BOOKLET ONLY SLIDE


41a

Notes:

Notes:


80

Nedbank Retail Embedding effective risk culture with adequate impairments - CLR impacted by advances mix, methodology changes & credit cycle

4,0 4,9 8,8 10,1 8,9 7,5

1 Actual CLR re-calculated assuming 2014 asset mix 2 Percentage defaulted advances including legal & non legal

6,3

Comparable CLR1

Retail CLR (%)

1,21 1,15 1,35

2,70

3,27

2,72

1,98 2,01 2,16

1,70

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

4,6 NPLs2 (%)

1,9

Other

Personal Loans

Home Loans

Extreme volatility

2,2 3,1 3,7 3,9 4,0 4,0 Total coverage3 (%) 2,3 3,6

3 2005 to 2008 numbers exclude MFC 4 Income statement impairments

5,6

4,1

4 959 1 512 3 559 5 644 1 040 3 729 887 3 927 I/S4 (Rm) 4 355

2,6

4,8

3,6

3 500

Target range

79

Nedbank Retail No fee increases assist in slowing client attrition & the switch to lower priced bundled offerings

Personal Loans

Other

Card

Secured Lending

Mix & activity

Fee increases

Total

Transactional Volume gains

Lending related

Comparison of YoY NIR growth Rm

2013

324

277

(269)

26

(34)

(211)

56

2014

449

299

24

39

196

(351)

33

+689 +169

R95m reduction for lower credit pricing with enhanced benefits

R235m opportunity cost of pricing decisions

42a

Notes:

Notes:


82

Nedbank Retail– Personal loans Personal loans operating within strategic intent & lowered risk profile

-20

0

20

40

5

10

15

20

25

30

1 Asset growth reflects the 6 months on the preceding 6 months growth annualised 2 GOI margin is the total gross operating income (Net Interest Income & Non Interest Revenue) divided by average advances, before Wealth related income 3 PD is the probability of loan going into default based on early warning risk indicators

Early, comprehensive actions taken since late 2011 have successfully mitigated risk Outcome achieved:

Book R3bn lower than December 13

Negative growth rate slowing in H2 2014

Portfolio expected to stabilise in 2015

Better quality risk, within desired risk appetite at higher pricing

Default Rate peaked in H1’13, now back in line with expectations

Impairment Methodology changes raised from 2012 to address risk of higher write-offs than forecast by models

PL asset growth1

Nedbank growth (%) Rest of market (%)

R3bn reduction in 2014

Expected PD model calibration 3 (%)

Actual / Predicted PD 3 (%)

Avg GOI margin2(%)

GOI margin & risk over time

2014 2009 2010 2011 2012 2013

81

Defaulted advances & specific impairments Rbn

Portfolio impairments Rbn

29 30 36 41 45 Specific coverage (%) 50

0,6 0,5 0,8 1,0 1,2 1,3 Performing book (%)

0,3 0,3 0,5 0,6 0,7 0,8 0,7 0,2 0,1 0,1 0,3 0,6

0,8 0,7 0,3 0,5

0,7 0,8

1,0 1,0 1,1

0,9 0,9 1,3

1,7

2,3 2,6 2,6

2008 2009 2010 2011 2012 2013 2014

Other

Personal Loans

Home Loans

Defaulted advances Specific impairments

12,8

20,1 17,7

14,4 12,4 11,4 10,2

3,6 5,9 6,2 5,9 5,6 5,7 5,0

2008 2009 2010 2011 2012 2013 2014

1

Nedbank Retail Defaulted advances reduced - coverage at highest levels

1,1

0,7

1

49

1,3

2

2

1 Restated to include acquisition of Imperial Bank; restatement effect on portfolio impairments is minimal, hence not explicitly shown 2 Restated due to an incorrect split in MFC between defaulted restructured accounts & performing restructured accounts. Restated R393m of defaulted

restructured accounts & R73m of related provisions which were incorrectly classified in Dec 2013 as performing & have now been correctly classified as defaulted to better reflect the underlying nature

1


43a

Notes:

Notes:


84

Nedbank Retail – Home Loans Early actions taken since mid 2009 to resolve 2006-2008 vintages with adequate coverage, while judiciously growing new business

2010 FY 2014 FY

Average advances (Rbn)1

Defaulted Loans (%)1 Credit Loss Ratio (%)1

Vintages Vintages

1 Retail Home loan book excluding Retail Relationship Banking & Business Banking 2 Based on Nedbank MMFTP, Liquidity & Balance Sheet Management charges, excluding endowment on ECAP 3 Margin required for 06-08 profile to be EP neutral in 2010, assuming no drop-off due to higher price 4 LTV based on original loan amount & valuation at point of registration

>100 90-100

LTV Distribution (%)4 Dec ‘14 Lending margin (%)2

~300bps higher margin required3

80-90 0-80

44 22 26

13 12

38

37 39

34 7

27 2

Pre-06 06-08 09-14

14

62

16 8

36 38

Pre-06 06-08 09-14

1.5 1.2 1.2

1.5 1.0

1.9

Pre-06 06-08 09-14

7,2

14,7

3,4 5,1

7,5

2,6

Pre-06 06-08 09-14

2,2 2,5

1,0

0,1 0,1 0,2

Pre-06 06-08 09-14

Headline Earnings (Rm)1

Vintages

(111)

(748)

(45)

44 86 355

Pre-06 06-08 09-14

83

HL’s embedded in CVP’s Priced for risk & better quality Origination via own channels (79% from

existing clients; 10% online) R1.2bn restructures (still on book) with

13% coverage (R0,8bn performing) Total balance sheet impairments 1,2%:

Portfolio 0,6%; Specific 22,7%

R16bn (36%) good quality1, but mis-priced by 125bps

R0,7bn in defined processes with 29% coverage

R4,4bn restructures (still on book) with 12% coverage (R3,3bn performing)

Total balance sheet impairments 3,1%: Portfolio 1,2%; Specific 27,8%

RoE dilution: 1,8% as no insurance commission received & 7% from mis-priced advances

Back book2

R43bn: Loss of R732m since 2009

Front book2

R38bn: Profit of R789m since 2009

RoE, %

1 Loans which would pass current credit policy utilising current pricing 2 Average Retail Home loan book excluding Retail Relationship Banking & Business Banking 3 Dec 2013 ROE restated due to due to changes in ALM risk management cost allocation

Nedbank Retail – Home Loans Fundamental redesign of home loans business model to address underperformance on risk & sources of competitive distinctiveness

(46,8) (36,7)

(6,4)

1,2 2,2 6,3

0

(8,6)

1,2

7,7

16,1 19,3

2009 2010 2011 2012 2013 20143

44a

Notes:

Notes:


86

Disclaimer

Nedbank Group has acted in good faith & has made every reasonable effort to ensure the accuracy & completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation. Forward-looking statements may be identified by words such as ‘believe’, 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' & 'hope'.

Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs & assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct & undue reliance should not be placed on such statements.

The risks & uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS & the interpretations, applications & practices subject thereto as they apply to past, present & future periods; domestic & international business & market conditions such as exchange rate & interest rate movements; changes in the domestic & international regulatory & legislative environments; changes to domestic & international operational, social, economic & political risks; & the effects of both current & future litigation.

Nedbank Group does not undertake to update any forward-looking statements contained in this document & does not assume responsibility for any loss or damage whatsoever & howsoever arising as a result of the reliance by any party thereon, including, but n limited to, loss of earnings, profits, or consequential loss or damage.

85

Plan R2.1bn distribution investment over 3 years (2015

to 2017), including 278 branch reformats, 63 new points of presence and 300 Intelligent Depositor devices (IDs)

64 branch reformats, 23 new points of presence and 23 closures in the next 12 months

Nedbank has redesigned the branches to provide a distinctive client experience ,including improved queuing and self service options such as video banking and cash deposit functionality at ATMs.

Nedbank Retail The investment in the reformat of branches to our “Branch of the future” format (BoF) is meeting client experience as well as financial expectations

Implementation Progress (per 31 December 2014) 171 branches reformatted 456 Intelligent Depositors installed Reduction in retail floor space of 10,418sqm

Impact Sales of transactional products have increased by

10% when compared to a control cell 39% of deposit transactions have shifted to self-

service (intelligent depositor ATMs) which exceed 354k transactions per month

20k transactions per month are being processed through the video banker capability

22% of the Nedbank client base has been exposed to the “branch of the future” formats

FINA

NCIA

L RESULTS



FINANCIAL RESULTS


1b

Commentary 2bFinancial highlights 10bConsolidated statement of comprehensive income 11bConsolidated statement of financial position 12bCondensed consolidated statement of cashflows 13bConsolidated statement of changes in equity 14bReturn on equity drivers 16bOperational segmental reporting 18bGeographical segmental reporting 20bBusiness profile 22bSegmental commentary

Nedbank Corporate 24bNedbank Capital 26bNedbank Corporate and Investment Bank 27bNedbank Retail and Business Banking 28bNedbank Wealth 36bRest of Africa Division 38b

Notes to the consolidated statement of comprehensive income 44bNedbank Group employee incentive schemes 63bNedbank Group estimated Bee dilutive shares and IFRS 2 charge 64b

Shareholders’ analysis 65bNedbank Group categories of financial instruments 66bNedbank Limited consolidated statement of financial position/trading categorisation 67bNedbank Limited consolidated statement of comprehensive income 68bNedbank Limited consolidated statement of financial position 69b

CONTENTS

2b

BaNkiNg aNd ECONOmiC ENvirONmENTThe operating environment in 2014 remained challenging for consumers, with global markets reflecting a mixed performance, and the local economy remained under pressure from strike action and electricity supply constraints. SA's gross domestic product (GDP) is forecast to grow at 1,4% for 2014, but in the absence of strike action, economic growth would have been 1% higher according to the South African Reserve Bank (SARB).

Weak economic conditions, the twin deficits and SA's resultant dependency on foreign capital inflows translated into rand depreciation and heightened inflationary pressures in the early part of the year, prompting an increase of 75 basis points in interest rates. These domestic factors contributed to Standard & Poor’s reaffirming SA’s sovereign risk rating at BBB negative with the outlook remaining stable (placing SA one notch above investment grade), Fitch Ratings revising its outlook on its BBB rating to negative and Moody's downgrading SA's debt rating to Baa2 with a stable outlook.

The SA banking industry was also tested by the collapse of African Bank Limited (Abil), the country's largest unsecured lender. The combined strength of the system ensured that Abil's resolution was successfully managed and that the bank was placed under curatorship with no significant consequences for the rest of the SA financial system.

Overall the credit environment remained muted, with wholesale credit demand continuing to outpace retail demand as poor employment prospects, high levels of indebtedness, increased interest rates and weak confidence levels weighed against consumers. Wholesale credit demand was supported by renewable-energy projects, corporate action and increased dealflow from the rest of Africa. Wholesale activity is expected to moderate as corporates remain hesitant to make long-term investments and increase production capacity given the weak economic outlook.

1 The Basel III regulatory requirements are being phased in between 2013 and 2019 and exclude the Pillar 2b add-on.

rEviEw Of rESulTSNedbank Group produced strong headline earnings growth of 14,0% to R9 880m (2013: R8 670m) for the year ended 31 December 2014. Growth was driven by an increase in net interest income (NII), improvements in impairments and growth in non-interest revenue (NIR), particularly in the second half of the year. Headline earnings included associate income from our shareholding in ecobank Transnational Incorporated (eTI) effective for the last quarter of the year.1

Diluted headline earnings per share (DHePS) increased 13,0% to 2 066 cents (2013: 1 829 cents) and diluted earnings per share increased 12,5% to 2 049 cents (2013: 1 822 cents). excluding associate income from eTI and the related funding costs, the group's organic DHePS increased 12,3%.1

economic profit (eP) of R2 112m (2013: R2 114m) was achieved against a higher cost of equity of 13,5% (2013: 13,0%). Return on average ordinary shareholders' equity (ROe) increased to 15,8%1 (2013: 15,6%)1 and ROe excluding goodwill was 17,2%1 (2013: 17,2%)1, supported by a higher return on assets (ROA) of 1,27%1 (2013: 1,23%).1

The group's balance sheet is well positioned. Our Basel III common-equity tier 1 (CeT1) ratio of 11,6% (2013: 12,5%) after acquiring approximately 20% of eTI is above the mid-point of our Basel III 2019 internal target range. Funding and liquidity levels remained sound, with statutory liquid assets and cash reserves increasing 18,5% to R82,6bn (2013: R69,7bn). The group met the 60% minimum liquidity coverage ratio (LCR) requirement on 1 January 2015. The LCR will be increased 10% annually to reach 100% on 1 January 2019.

Net asset value per share continued to increase, growing 9,5% to 14 395 cents (2013: 13 143 cents).1

2014 aNNual rESulTS COMMeNTARy


3b

FOR STAFF – creating 380 new employment opportunities and converting 606 temporary positions to permanent positions; providing exciting career growth opportunities as we grew the franchise into the rest of Africa; investing R489m in training and 1 538 staff attending our Leading for Deep Green programme; supporting 125 external bursars across 18 universities; improving staff transformation and continuing the positive shift in corporate culture; embedding our top three culture values of accountability, client satisfaction and brand reputation.

FOR CLIeNTS – investing in exciting client-centred innovations such as Send-imaliTM (mobile money send/cardless cash withdrawal capability) and market EdgeTM (an analytics tool for merchants). Value-adding enhancements were made to our App Suite (including instant payments) and to approveiTTM (including secure card-not-present transactions and SIM swap detection). Our progress in innovation was acknowledged with Nedbank receiving the 2014 African Banker Award for Innovation. As regards our physical distribution channels, we made banking more accessible, increasing new outlets by 22 and owned ATMs by 304, as well as converting, to date, 171 outlets to the Branch of the Future format. We advanced R167bn (2013: R159bn) of new loans to clients and assets under management grew 11,4% to R212bn (2013: R190bn). For the sixth consecutive year Nedgroup Investments was placed third overall in the Domestic Management Company category at the annual Raging Bull Awards. All of these have resulted in group client numbers increasing 7% to 7,1m since December 2013.

FOR SHAReHOLDeRS – increasing the full-year dividend 14,9% ahead of the 12,9% growth in headline earnings per share (HePS) and generating a total shareholder's return (TSR) of 23,2%. We acquired an initial 36,4% stake (with a pathway to control in 2016) of Banco Único in Mozambique and a shareholding of approximately 20% in eTI. economic growth in the rest of Africa is faster than in SA and these investments offer our shareholders access to earnings growth in these markets while also providing the diversification benefits of having a presence across 39 countries. For our SA broad-based black economic empowerment (BBBee) shareholders we have unlocked an estimated R8,2bn of value for more than 500 000 beneficiaries since inception.

FOR ReGuLATORS – full compliance with Basel III phase-in requirements, including maintaining strong capital levels with a CeT1 ratio of 11,6% and an average long-term funding ratio of 25,4%; making cash taxation payments of R8,0bn, relating to direct, indirect, pay-as-you-earn (PAye) and other taxation; participating in the Abil resolution and underwriting; maintaining strong, transparent relationships with all regulators; contributing to working groups on new regulation and continuing to support responsible banking practices.

FOR COMMuNITIeS – contributing R126m to socioeconomic development, including R75m towards education. We also advanced R54bn in new loans to retail clients, R1,2bn to affordable-housing developments across the country and R113m to enterprise development. Our Fair Share 2030 pilot delivered various successes, a highlight being a loan to a healthcare group that will enable a projected cost-saving to our client from reduced energy consumption of R1bn over 10 years. From an operational perspective we sourced 87% or R8,5bn of our procurement locally. We continued our commitment to managing our operational impact and maintained our carbon-neutral status, and also attracted shareholder investment by remaining on the Dow Jones Sustainability Index for the ninth consecutive year. We maintained our level 2 BBBee contributor status for the sixth consecutive year. Together with Old Mutual, we pledged a combined uS$1m towards the African union–Private Sector ebola Fund.

dElivEriNg SuSTaiNaBly TO ALL OuR STAkeHOLDeRS

Nedbank Group is committed to long-term value creation for all our stakeholders. In line with our vision to

be Africa's most admired bank by staff, clients, shareholders, regulators and communities, we are

pleased to report as follows in 2014:

delivering value to all our stakeholders assisted Nedbank in once again being awarded Sa Bank of the

year for 2014 by the Financial Times and The Banker magazine, matching the achievements of 2011 and 2013.

4b

2014 ANNuAL ReSuLTS COMMeNTARy (continued)

CluSTEr pErfOrmaNCEOur business clusters have developed competitive client value propositions and strong market positioning as reflected in headline earnings (He) growth of 19,3%1 and an increased ROe of 19,7%1 (2013: 18,7%)1 against a higher average total capital allocated at R51,4bn (2013: R45,5bn).1

% change

Headline earnings

(Rm)1Return on

investment (%)1

2014 2013 2014 2013

Nedbank Capital 23,3 2 128 1 726 30,9 29,4Nedbank Corporate 15,8 2 599 2 245 24,5 26,4Nedbank Business Banking 17,8 1 094 929 20,1 19,4Nedbank Retail 15,7 2 937 2 539 13,3 11,6Nedbank Wealth 15,8 1 042 900 36,8 36,2

Rest of Africa Division 106,4 357 173 10,1 8,7

Business clusters 19,3 10 157 8 512 19,7 18,7

Centre >(100) (277) 158

Total 14,0 9 880 8 670 15,8 15,6

Nedbank Capital grew He 23,3%, with this strong performance driven by good net-interest-income (NII) growth and improvements in impairments. Lower non-interest revenue (NIR) growth reflects the high 2013 base in trading income related to renewable-energy transactions. Preprovisioning operating profit growth was 12,0%.

He growth of 15,8% in Nedbank Corporate was underpinned by strong NII and NIR growth. The increase in NII was supported by commercial mortgage and corporate lending activities and endowment benefits. The growth in NIR was from core transactional income and private-equity investments. Low levels of impairments continue to reflect good risk management across the portfolio.

Nedbank Business Banking's strong increase of 17,8% in He and improving ROe follow the normalisation of impairments from a large single-client default in 2013 and solid NII growth from increased product volumes and higher endowment earnings. Lower NIR reflects the impact of maintaining transactional fees at 2013 levels as well as the proactive reduction of transactional banking fees in alignment with market practices. Preprovisioning operating profit was up 5,8%.

He in Nedbank Retail grew 15,7% and benefited from an improvement in impairments in personal loans and home loans. NIR was influenced by the strategic decision to slow down growth in personal loans and maintain transactional fees at 2013 levels. Consequently, preprovisioning operating profit decreased by 4,1%.

Nedbank Wealth's He growth of 15,8% was off a high 2013 base. This was largely due to record earnings growth in Wealth Management and continued momentum in Asset Management, partially offset by relatively slower growth from Insurance. The performance in Insurance resulted from lower levels of sales of traditional insurance products, including homeowner’s cover and personal-loan-related insurance products.

The Rest of Africa Division, previously included in the Centre, reported earnings of R357m (2013: R173m), showing strong growth, including associate income from eTI as estimated by Nedbank on a prudent basis effective from the fourth quarter, as eTI reports later than Nedbank. The division also reported stronger performance from all five of our regional subsidiaries.

He at the Centre includes net endowment on surplus capital and fair-value gains in the hedged portfolios, offset by additional portfolio impairment provisions for ongoing economic uncertainties, with the central portfolio provision increased by R150m to R350m.

fiNaNCial pErfOrmaNCENet interest incomeNII grew 8,2%1 to R22 961m1 (2013: R21 220m)1, benefiting from 9,7% growth in average interest-earning banking assets.1

The net interest margin (NIM) narrowed to 3,52% (2013: 3,57%). The endowment income benefit from higher interest rates was offset by asset and liability margin compression. Asset margins were impacted by the change in asset mix as lower-yielding wholesale advances grew faster than higher-yielding retail advances, including the reduction in our personal-loans book, and by holding higher levels of lower-yielding high-quality liquid assets for Basel III LCR requirements. Liability margin compression arose from higher levels of competition for Basel III-friendly deposits.

Impairments charge on loans and advancesImpairments decreased 19,0% to R4 506m (2013: R5 565m) and the credit loss ratio (CLR) declined to 0,79% (2013: 1,06%), despite increased coverage levels and the strengthening of central provisions to R350m (2013: R200m) in line with the group's view of a protracted weak economic environment.1

Credit loss ratio (%)dec

20141H2

2014H1

2014Dec

20131

Specific impairments 0,72 0,67 0,78 0,97

Portfolio impairments 0,07 0,07 0,05 0,09

Total credit loss ratio 0,79 0,74 0,83 1,06

CLRs decreased across all clusters as a result of ongoing improvements in asset quality, prudent credit granting and strong collections. Higher levels of postwriteoff recoveries of R941m (2013: R888m) were recorded, including personal-loan recoveries of R343m (2013: R276m).

Credit loss ratio (%)

%banking

advancesdec

20141H2

2014H1

2014Dec2013

Through-the-cycle target

ranges

Nedbank Capital 12,8 0,14 0,32 (0,04) 0,51 0,10 – 0,55Nedbank Corporate 33,1 0,21 0,21 0,22 0,23 0,20 – 0,35Nedbank Business Banking 11,4 0,42 0,39 0,44 0,65 0,55 – 0,75Nedbank Retail 36,0 1,70 1,50 1,90 2,16 1,90 – 2,60Nedbank Wealth 4,2 0,17 0,13 0,21 0,28 0,20 – 0,40

Rest of Africa Division 2,6 0,23 0,06 0,42 0,37

Group 0,79 0,74 0,83 1,06 0,80 – 1,20


5b

Total group defaulted advances decreased by 11,2% to R15 846m (2013: R17 848m), driven by continued improvements in the residential-mortgage and personal-loans books. Total defaulted advances now constitute 2,5% of the book (2013: 3,0%).

Coverage ratios for total and specific impairments strengthened to 70,0% (2013: 64,2%) and 43,1% (2013: 42,3%) respectively. Portfolio coverage improved to 0,70% (2013: 0,68%).

Non-interest revenueDuring the year a number of strategic actions were implemented to position the group for growth into the future. These actions included the slowdown in growth of personal loans, reducing the pricing of our credit life product (but with increased benefits), maintaining transactional fees at 2013 levels, and implementing selected fee reductions in Retail Relationship Banking and Business Banking.

As a result NIR increased by 4,9%1 to R20 312m1 (2013: R19 361m)1, with strong growth of 10,2% in the second half of the year.

The underlying drivers of NIR growth included:

■ Commission and fee income increasing 3,9%1 to R14 570m1 (2013: R14 023m)1, driven by good transactional-banking volume growth and ongoing client acquisition, notwithstanding the effect of no fee increases and fee reductions amounting to R355m.

■ Insurance income growing 3,1%1 to R1 986m1 (2013: R1 927m)1, which was achieved mainly in the second half of the year, through a better claims experience and continued momentum in non-traditional insurance offset by a slow down in retail volumes.

■ Trading income growing 3,3%1 to R2 648m1 (2013: R2 564m)1 off a high 2013 base.

■ Private-equity income increasing 88,0%1 to R423m1 (2013: R225m)1 following higher profits realised on listed investments of R434m (2013: R192m).

■ Fair-value gains of R35m1 (2013: R40m)1, which were recognised primarily as a result of basis risk on centrally hedged banking book positions and accounting mismatches in the hedged fixed-rate advances portfolios.

Expensesexpenses growth of 9,4%1 to R24 534m1 (2013: R22 419m)1 is reflective of continued investment in the group's franchises.

The main contributors were:

■ staff-related costs increasing 9,6%, comprising growth in remuneration of 8,8% and an increase in variable incentives;

■ computer-processing costs growing 13,9% to R3 097m, including amortisation costs of R654m, up 12,0%.

■ fees and insurance costs increasing 10,7% in line with higher volumes of revenue-generating activities, such as cash handling, card issuing and acquiring, and client acquisition costs in Nedbank Wealth.

Associate incomeAssociate income increased to R161m (2013: R27m), largely driven by the estimated income from our shareholding of approximately 20% in eTI, effective from 1 October 2014.1 The group's results includes Nedbank's own conservative estimate of eTI's earnings, as the publication dates of eTI results are not aligned to Nedbank Group.

STaTEmENT Of fiNaNCial pOSiTiONCapitalThe group remains well capitalised, with all capital adequacy ratios well above the Basel III minimum regulatory capital requirements and within the group’s Basel III internal target ranges.

Basel III1dec

2014 Jun

2014 Dec

2013

Internal target range

Regulatory minimum1

CeT1 ratio 11,6% 12,1% 12,5% 10,5% – 12,5% 5,5%

Tier 1 ratio 12,5% 13,1% 13,6% 11,5% – 13,0% 7,0%

Total capital ratio 14,6% 15,0% 15,7% 14,0% – 15,0% 10,0%(Ratios calculated include unappropriated profits.)

1 The Basel III regulatory requirements (excluding unappropriated profits) are being phased in between 2013 and 2019 and exclude the Pillar 2b add-on.

Our CeT1 ratio of 11,6% (2013: 12,5%) is above the mid-point of our Basel III 2019 internal target range. The decrease in the ratio since June 2014 is largely as a result of the expected 0,9% capital impact from our investments in eTI and Banco Único.

The tier 1 and total capital ratios reflect the progressive grandfathering of old-style instruments in accordance with Basel III transitional arrangements. Because of this only 80% of Nedbank's preference shares and hybrid debt qualified as tier 1 capital in 2014. In addition, NeD 8, a R1,7bn old-style tier 2 subordinated-debt instrument, was called in February 2014 and replaced with R2,5bn of new-style Basel III-complaint tier 2 instruments.

Further details on risk and capital management is available in the Risk and Balance Sheet Management Review section of this booklet and the Pillar 3 Report to be published on the website at nedbankgroup.co.za in March 2015.

Funding and liquidityThe group's balance sheet remains well funded, with deposits increasing 8,4%1 to R653,5bn1 (2013: R603,0bn)1 and the loan-to-deposit ratio strengthening to 93,8%1 (2013: 96,1%)1.

Our strategy of growing retail and commercial deposits and maintaining a conservative term-funding profile continues to be reflected in the group's average long-term funding ratio for the fourth quarter of 25,4% (average fourth quarter 2013: 26,2%), which has tended to be above the industry average.

The group maintained a sound liquidity position, with contingent liquidity well in excess of prudential liquidity requirements. The statutory liquid assets and cash reserves, combined with the surplus liquid-asset portfolio of R37,0bn (2013: R28,0bn), increased 18,5% to R82,6bn (2013: R69,7bn).

Liquidity coverage ratioSARB adopted the Basel Committee's LCR phase-in arrangements where, from 1 January 2015, SA banks must meet the minimum regulatory requirement of 60%, which increases by 10% annually to reach 100% on 1 January 2019.

Nedbank has met the minimum LCR requirement of 60%, and implemented an appropriately conservative buffer. The group is well positioned to meet the ongoing LCR requirements throughout the transitional period.

6b


Loans and advancesLoans and advances grew 5,8%1 to R613,0bn1 (2013: R579,4bn)1. excluding low-yielding trading advances, banking advances growth was 8,1%, underpinned by gross new payouts of R166,8bn (2013: R158,9bn). Loans and advances by cluster are as follows:

Rm % change 20141 20131

Nedbank Capital (3,6) 105 601 109 549 Banking activities 9,1 78 596 72 066Trading activities (28,0) 27 005 37 483

Nedbank Corporate 13,9 199 557 175 274Nedbank Business Banking 4,8 65 819 62 785Nedbank Retail 3,9 203 063 195 435Nedbank Wealth 12,4 24 819 22 082Rest of Africa (4,3) 14 073 14 700

Centre >100 89 (453)

5,8 613 021 579 372

Banking advances growth was primarily driven by strong growth from Nedbank Capital and Nedbank Corporate, which together contribute 47,5% of total banking advances and 49,7% of the year-on-year growth.

Nedbank Retail’s slower advances growth reflects the 16,3% decrease in personal loans, which largely offset stronger growth in Card and MFC (vehicle finance) of 17,1% and 12,1% respectively.

Advances growth decreasing in the Rest of Africa Division resulted from growth in the regional subsidiaries of 17,2% being more than offset by the repayment of the eTI loan of uS$285m.

Total assets administered by the group has surpassed the R1,0tn level for the first time, having increased 8,7% for the year (2013: R939,9m). Assets under management increased 11,4% to R212m (2013: R190,3m) following good market performance.1

Group strategic focusWe made good progress with our five key strategic focus areas, namely:

■ Client-centred innovation: We continue to introduce innovative products such as Send-imali™, the MyfinancialLife™ retirement calculator, our Greenbacks Rewards Programme SHOP Card and, for wholesale clients, our worldclass plug and Transact™ token and market Edge™, a merchant analytics tool. Altogether 171 outlets in the Branch of the Future format have been converted to date and we currently plan to have converted 75% of all outlets by 2017. Digital channels remain important and digitally enabled clients increased by 48% while the value of Nedbank app Suite™ transactions increased 66% to R58bn. Our ability to launch additional functionality without clients having to reinstall the App Suite once again contributed to Nedbank being a finalist for the MTN Best Android Consumer App award in 2014. Our progress in innovative banking solutions was further acknowledged by our receiving the 2014 African Banker Award for Innovation. The implementation of our new transactional switch in 2014 will enhance our electronic transactional capabilities into the future.

■ growing our transactional banking franchise: The strategic decision taken to build our franchise and client relationships through maintaining our transactional fees at 2013 levels, and reducing selected fees in some businesses, has seen early successes as client attrition metrics improved, cross-sell increased and client gains continued in both total and main banked categories. Our brand value increased 15% to R12,6bn in 2014 as reported by Brand Finance SA's Top 50 Most Valuable Brands Survey and Nedbank was rated the third-most-valuable bank brand in SA.

■ Optimise and invest: Across Nedbank Group we have initiated various cost and efficiency optimisation initiatives. Through our ‘rationalise, standardise and simplify' information technology strategy we are decreasing our core systems from 250 to 60, 18 of which have been decommissioned in 2014 and 74 to date. On 1 January 2015 we went live with our SAP enterprise resource planning (eRP) replacement system for finance and procurement – on time, on budget and within scope – with human resources to follow later in the year. In addition, we are working on a range of alliances and synergies with the Old Mutual Group in SA and have made substantial progress towards the 2017 Old Mutual Group target of R1bn for collaborative initiatives. We currently expect that just less than 30% of this will accrue to Nedbank.

■ Strategic portfolio tilt: The benefits from the early action taken in reducing our home-loan and personal-loan portfolios have been evident in our 2014 results. Our focus on growing activities that generate economic profit, such as transactional deposits, transactional banking and investment in the rest of Africa, remains high on the agenda. The benefit of our actions over the past four years has enabled the group to maintain a sound balance sheet and reduce impairments, while delivering dividend growth ahead of HePS growth.

■ pan-african banking network: During the period we concluded the acquisition of an initial 36,4% shareholding (with a pathway to control in 2016) of Banco Único in Mozambique. In our Rest of Africa subsidiaries we have made good progress in implementing a standardised operating model and our Flexcube information technology system is planned to be implemented in Namibia in 2015. This has strengthened Nedbank's franchise and client proposition in the Southern African Development Community (SADC) and east Africa. In West and Central Africa our alliance with eTI continues to deliver value for the group. During October 2014 we exercised our rights to subscribe for a 20% shareholding in eTI for a consideration of uS$493,4m. Our alliance with Bank of China has progressed and since inception we have concluded a number of deals together. Additional disclosure of our progress in the rest of Africa is contained in the segmental commentary of this booklet.

Value created through broad-based black economic empowermentNedbank Group introduced its BBBee transaction in 2005 to facilitate broad-based black ownership equating to 11,5% of the value of the group's SA businesses at that stage. The intention was to create sustainable value for a broad base of diverse beneficiaries, including strategic black business partners, employees, non-executive directors, clients and community interest groups affiliated with the company.

The group is pleased to announce that the strong financial performance achieved by Nedbank over the nine years since the introduction of the BBBee transaction in 2005 has enabled the creation of approximately R5,5bn during the life time of the scheme itself, which would be worth an estimated R8,2bn at prevailing market prices for over 500 000 direct and indirect beneficiaries.

Further information on the specific repurchase and issue relating to the BBBEE transaction will be included in the JSE SENS announcement published on 23 February 2015, which will also be available on the group's website at nedbankgroup.co.za.


7b

Economic outlookThe SA economy is forecast to improve modestly off a low base, although growth will be constrained by disruptions to power supply and weaker growth anticipated in key export markets, particularly in the eurozone and China.

Growth in GDP is currently forecast at 2,5% for 2015 as the economy recovers from the effects of strike action and exports are boosted by a weaker rand. Risk to this appears to be on the downside. The sharp drop in global fuel prices has improved the inflation outlook, and interest rates are expected to remain unchanged at current levels until late in the year. The softer interest rate outlook and lower borrowing costs should support consumer credit demand and limit credit defaults in 2015, notwithstanding the weak job market and still high consumer debt levels.

Retail banking conditions are therefore likely to improve modestly, but growth in wholesale banking may moderate from current levels as fixed-investment plans and credit demand will be limited by the severity and extent of infrastructure constraints, rising production costs, soft global demand and low international commodity prices.

ProspectsOur guidance on financial performance for the full 2015 year is as follows:

■ Advances to grow at mid-single digits. ■ NIM to be below the 2014 level of 3,52%. ■ CLR to be at the lower end of the through-the-cycle target range of 80 to 120 basis points. ■ NIR (excluding fair-value adjustments) to grow above mid-single digits. ■ expenses to increase above mid-single digits.

Although forecast risk remains high, we once again expect organic growth in DHePS to be above nominal GDP growth for the year ahead.

Our medium-to-long-term targets and performance outlook for 2015 for these are as follows:

Metric 2014 performance

Medium-to-long-term targets 2015 full-year outlook

ROe (excluding goodwill) 17,2% 5% above cost of ordinary shareholders’ equity Below target

Growth in DHePS 13,0%≥ consumer price index + GDP growth + 5% > consumer price index + GDP growth

Growth in organic DHePS 12,3%

CLR 0,79% Between 0,8% and 1,2% of average banking advances At lower end of target range

NIR/expense ratio 82,8% >85% Below target

efficiency ratio1 56,5% 50,0% to 53,0%2 Above target

CeT1 capital adequacy ratio (Basel III) 11,6% 10,5% to 12,5% Within target range

economic capital Internal Capital Adequacy Assessment Process (ICAAP): A debt rating (including 10% capital buffer)

Dividend cover 2,07 times 1,75 to 2,25 times 1,75 to 2,25 times1 Includes associate income in line with industry accounting practices. 2 Target will be reviewed for the impact of inclusion of associate income.

Shareholders are advised that these forecasts are based on our latest macroeconomic outlook, and have not been reviewed or reported on by the group's auditors.

8b


Board appointments During the period David Adomakoh, Mantsika Matooane and Brian Dames were appointed as independent non-executive directors with effect from 21 February, 15 May and 30 June 2014 respectively.

Paul Hanratty, Chief Operating Officer (COO) of Old Mutual plc was appointed as Non-independent Non-executive Director with effect from 8 August 2014.

Mfundo Nkuhlu, previously Managing executive of Nedbank Corporate, succeeded Graham Dempster as COO and joined the board as executive Director with effect from 1 January 2015. In his new role Mfundo has overall responsibility for the Rest of Africa Division, Balance Sheet Management, Information Technology, Human Resources, Marketing, Communications and Corporate Affairs, and Strategic Planning. Graham will continue to focus on strategic initiatives in the Rest of Africa until his retirement on 31 May 2015.

Dr Reuel khoza, the current Chairman, reached his nine-year term in August 2014 and in line with Nedbank Group policy retires at the close of the annual general meeting (AGM) on 11 May 2015. Vassi Naidoo will be appointed Non-executive Director of the companies with effect from 1 May 2015. The boards of Nedbank Group and Nedbank have resolved to elect Vassi as Chairman of the companies immediately following the conclusion of the Nedbank Group AGM scheduled to be held on 11 May 2015.

Group executive appointmentsThe group announced a number of executive appointments during the year. All the appointments were internal and are evident of our well thought out succession planning processes and the depth of our talent pipelines.

Philip Wessels was appointed Managing executive of Retail and Business Banking, following the appointment of Ingrid Johnson as Financial Director of our parent, Old Mutual plc. Trevor Adams succeeded Philip as Chief Risk Officer with effect from 1 August 2014 and Mike Davis joined the Group executive Committee as Group executive of Balance Sheet Management with effect from 1 January 2015 to fill Trevor's previous role.

Following the announcement in November 2014 that Nedbank Capital and Nedbank Corporate will be integrated into a single client-facing, wholesale business cluster, Brian kennedy, Managing executive of Nedbank Capital, will be accountable for the combined corporate and investment bank, including the implementation of the business structure and operating model with effect from 1 January 2015. This newly formed cluster will offer the full spectrum of wholesale products under one brand and one leadership team. Our objective is to create a wholesale business that combines the strengths of Nedbank Capital and Nedbank Corporate to build a market-leading franchise with an even stronger client-centred focus.

Priya Naidoo joined the Group executive Committee on 1 January 2015 and will succeed John Bestbier, Group executive for Strategic Planning and economics, on his scheduled retirement date of 30 June 2015.

Accounting policies1 Nedbank Group Limited is a company domiciled in SA. The summary consolidated financial results of the group at and for the year ended 31 December 2014 comprise the company and its subsidiaries (the group) and the group's interests in associates and joint arrangements.

The financial results contained in the SeNS announcement has been extracted from the consolidated financial statements, which have been prepared in accordance with the requirements of the JSe Listings Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings

Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncement as issued by the Financial Reporting Standards Council and also, as a minimum, to contain the information required by IAS 34: Interim Financial Reporting. The accounting policies applied in the preparation of the consolidated financial results, from which the summary consolidated financial statements were derived, are in terms of IFRS and are consistent with the accounting policies applied in the preparation of the previous consolidated financial results.

The summary consolidated financial results have been prepared under the supervision of Raisibe Morathi, the Chief Financial Officer.

Events after the reporting period1

The various BBBee schemes that reached their maturity dates on 1 January 2015 will be rationalised through a specific repurchase of Nedbank Group shares. The repurchased shares will not have a significant impact on the consolidated financial position of the group and will be delisted, cancelled and reinstated as authorised but unissued shares. Following this, the Community Trust, which matures only in 2030, will subscribe for Nedbank Group shares to maintain its shareholding in the group.

On 15 January 2015 Nedbank Limited's unsecured subordinated NeDH1A and NeDH1B notes were redeemed and R225m of new-style tier 2 debt instruments issued. A further R5,4bn of senior unsecured debt was issued on 12 February 2015.

At 31 December 2014 the carrying value of our long-term strategic investment in eTI was R6.2bn. Based on the eTI share price at year-end the market value was R5.5bn. We assessed the indicators of impairment at 31 December 2014 in terms of International Accounting Standard (IAS) 39 and took into consideration that eTI shares trade in low volume, the price is therefore subject to volatility and does not reflect the underlying financial and strategic value of the investment to the Nedbank Group. Therefore, we did not impair our investment at 31 December 2014. Subsequent to the year-end on 19 February 2015 the market value of eTI, based on the share price, was R4.4bn. We will continue to assess the indicators of impairment in future reporting periods.

Audited summary consolidated financial results – independent auditors’ report kPMG Inc and Deloitte & Touche, Nedbank Group's independent auditors, have audited the consolidated financial results of Nedbank Group Limited from which the summary consolidated financial results have been derived, and have expressed an unmodified audit opinion on the financial statements. These summary consolidated financial results comprise the summary consolidated statement of financial position at 31 December 2014, summary consolidated statement of comprehensive income, summary consolidated statement of changes in equity and summary consolidated statement of cashflows for the year then ended and selected explanatory notes. The related notes are marked with1. Both audit reports are available for inspection at Nedbank Group's registered office.

The auditors’ report does not necessarily report on all of the information contained in the financial results. Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditors’ engagement, they should obtain a copy of the auditors’ report together with the accompanying financial information from Nedbank Group‘s registered office. The directors take full responsibility for the preparation of the summarised consolidated financial results and that the financial information has been correctly extracted from the underlying audited consolidated financial results.


9b

Forward-looking statementsThis announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies that, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include global, national and regional economic conditions; levels of securities markets; interest rates; credit or other risks of lending and investment activities; as well as competitive and regulatory factors. By consequence, all forward-looking statements have not been reviewed, audited or reported on by the group's auditors.

Final-dividend declaration Notice is hereby given that a gross final dividend of 568 cents per ordinary share has been declared, payable to shareholders for the year ended 31 December 2014. The dividend has been declared out of income reserves.

The dividend will be subject to a dividend withholding tax rate of 15% (applicable in SA) or 85,2000 cents per ordinary share, resulting in a net dividend of 482,80000 cents per ordinary share, unless the shareholder is exempt from paying dividend tax or is entitled to a reduced rate in terms of an applicable double-tax agreement.

Nedbank Group Limited's tax reference number is 9375/082/71/7 and the number of ordinary shares in issue at the date of declaration is 499 257 807.

In accordance with the provisions of Strate, the electronic settlement and custody system used by JSe Limited, the relevant dates for the dividend are as follows:

Event date

Last day to trade (cum dividend) Thursday, 26 March 2015Shares commence trading (ex dividend) Friday, 27 March 2015Record date (date shareholders recorded in books) Thursday, 2 April 2015

Payment date Tuesday, 7 April 2015

Share certificates may not be dematerialised or rematerialised between Friday, 27 March 2015, and Thursday, 2 April 2015, both days inclusive.

On Tuesday, 7 April 2015, the dividend will be electronically transferred to the bank accounts of shareholders. Holders of dematerialised shares will have their accounts credited at their participant or broker on Tuesday, 7 April 2015.

For and on behalf of the board

dr reuel khoza mike Brown

Chairman Chief executive

23 February 2015

10b

Financial highlightsfor the year ended 31 December

% change 2014 2013

Statisticsnumber of shares listed m 499,3 510,3number of shares in issue, excluding shares held by group entities m 465,6 461,2Weighted average number of shares m 464,4 460,2Diluted weighted average number of shares m 478,2 474,1headline earnings Rm 14,0 9 880 8 670Profit attributable to equity holders of the parent Rm 13,4 9 796 8 637Preprovisioning operating profit Rm 3,5 17 873 17 268Economic profit Rm (0,1) 2 112 2 114headline earnings per share cents 12,9 2 127 1 884Diluted headline earnings per share cents 13,0 2 066 1 829Basic earnings per share cents 12,4 2 109 1 877Diluted basic earnings per share cents 12,5 2 049 1 822Ordinary dividends declared per share cents 14,9 1 028 895interim 460 390Final 568 505Ordinary dividends paid per share cents 965 802Dividend cover times 2,07 2,11Total assets administered by the group Rm 8,7 1 021 326 939 935total assets Rm 8,0 809 313 749 594assets under management Rm 11,4 212 013 190 341life assurance embedded value Rm 12,0 2 393 2 137life assurance value of new business Rm (27,0) 257 352net asset value per share cents 9,5 14 395 13 143tangible net asset value per share cents 10,6 12 553 11 346closing share price cents 18,6 24 900 21 000Price/earnings ratio historical 11,7 11,1Market capitalisation Rbn 16,0 124,3 107,2

number of employees 3,3 30 499 29 513

Key ratios (%)Return on ordinary shareholders’ equity (ROE) 15,8 15,6ROE, excluding goodwill 17,2 17,2tangible ROE 18,2 18,3Return on total assets (ROa) 1,27 1,23Return on risk-weighted assets 2,24 2,21net interest income to average interest-earning banking assets 3,52 3,57non-interest revenue to total income 46,9 47,7non-interest revenue to total operating expenses 82,8 86,4credit loss ratio – banking advances 0,79 1,06Efficiency ratio1 56,5 55,2gross operating income (incl associate income) growth less expense growth rate (JaWs ratio)1 (2,5) 0,7Effective taxation rate 25,3 25,2group capital adequacy ratios (including unappropriated profits):– common-equity tier 1 11,6 12,5– tier 1 12,5 13,6– total 14,6 15,7Exchange rates used:Pound at the end of the period 18,04 17,36Pound average rate 17,88 15,17Us dollar at the end of the period 11,58 10,50

Us dollar average rate 10,87 9,761 Ratios include associate income to align better with industry practice, no impact on 2013 ratios.


11b

cOnsOliDatED statEMEnt OF cOMPREhEnsivE incOMEfor the year ended 31 December

Rm Note%

change 2014 2013

interest and similar income 14,2 52 619 46 087

interest expense and similar charges 19,3 29 658 24 867

net interest income 1 8,2 22 961 21 220

impairments charge on loans and advances 2 (19,0) 4 506 5 565

income from lending activities 17,9 18 455 15 655

non-interest revenue 3 4,9 20 312 19 361

Operating income 10,7 38 767 35 016total operating expenses 4 9,4 24 534 22 419

indirect taxation 5,7 635 601

Profit from operations before non-trading and capital items 13,4 13 598 11 996non-trading and capital items 94,6 (109) (56)

Revaluation of investment properties 6 6

Profit from operations 13,0 13 495 11 946

share of profits of associate companies and joint arrangements 161 27

Profit from operations before direct taxation 14,1 13 656 11 973

total direct taxation 5 15,0 3 468 3 016

Profit for the year 13,7 10 188 8 957Other comprehensive income net of taxation 647 1 675Exchange differences on translating foreign operations 390 690Fair-value adjustments on available-for-sale assets 21 32actuarial profit/(losses) on long-term employee benefit assets 34 731gains on property revaluations 202 222

Total comprehensive income for the year 1,9 10 835 10 632

Profit attributable to:– Equity holders of the parent 9 796 8 637– non-controlling interest – ordinary shareholders 6 69 28

– non-controlling interest – preference shareholders 7 323 292

Profit for the year 13,7 10 188 8 957

total comprehensive income attributable to:– Equity holders of the parent 10 431 10 295– non-controlling interest – ordinary shareholders 81 45

– non-controlling interest – preference shareholders 323 292

Total comprehensive income for the year 1,9 10 835 10 632

headline earnings reconciliationProfit attributable to equity holders of the parent 13,4 9 796 8 637less: non-headline earnings items (84) (33)non-trading and capital items (109) (56)taxation on non-trading and capital items 19 18Fair-value adjustments on investment properties 6 5

Headline earnings 14,0 9 880 8 670

12b

cOnsOliDatED statEMEnt OF Financial POsitiOnat 31 December

Rm Note 2014 2013

Assetscash and cash equivalents 13 339 20 842Other short-term securities 67 234 42 451Derivative financial instruments 15 573 13 390government and other securities 27 177 32 091loans and advances 8 613 021 579 372Other assets 8 715 8 673current taxation assets 291 565investment securities 9 20 029 19 348non-current assets held for sale 16 12investments in private-equity associates, associate companies and joint arrangements 11 7 670 1 101Deferred taxation assets 309 216investment property 130 214Property and equipment 7 773 6 818long-term employee benefit assets 4 546 2 980Mandatory reserve deposits with central banks 14 911 13 231

intangible assets 10 8 579 8 290

Total assets 809 313 749 594

Equity and liabilitiesOrdinary share capital 466 461Ordinary share premium 16 781 16 343

Reserves 49 777 43 813

Total equity attributable to equity holders of the parent 67 024 60 617non-controlling interest attributable to:– Ordinary shareholders 6 326 246

– Preference shareholders 3 561 3 473

Total equity 70 911 64 336Derivative financial instruments 15 472 16 580amounts owed to depositors 12 653 450 602 952Other liabilities 13 788 14 682current taxation liabilities 134 301Deferred taxation liabilities 931 789long-term employee benefit liabilities 3 071 1 842investment contract liabilities 11 747 11 523insurance contract liabilities 4 171 3 321

long-term debt instruments 13 35 638 33 268

Total liabilities 738 402 685 258

Total equity and liabilities 809 313 749 594


13b

cOnDEnsED cOnsOliDatED statEMEnt OF cashFlOWsfor the year ended 31 December

Rm 2014 2013

cash generated by operations 21 332 20 553

change in funds for operating activities (11 231) (4 507)

net cash from operating activities before taxation 10 101 16 046

taxation paid (4 283) (3 890)

cashflows from operating activities 5 818 12 156cashflows utilised by investing activities (9 455) (4 341)cashflows utilised by financing activities (2 132) (800)

Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) (54) (64)

net (decrease)/increase in cash and cash equivalents (5 823) 6 951

cash and cash equivalents at the beginning of the period¹ 34 073 27 122

cash and cash equivalents at the end of the period¹ 28 250 34 073

¹ Including mandatory reserve deposits with central banks.

14b

cOnsOliDatED statEMEnt OF changEs in EqUityfor the year ended 31 December

Rm

Number ofordinary

shares

Ordinaryshare

capital

Ordinaryshare

premium

Foreigncurrency

translationreserve

Propertyrevaluation

reserve

Share-basedpayments

reserve

Other non-distributable

reserves1Available-for-

sale reserve

Otherdistributable

reserves2

Total equityattributable toequity holders

of the parent

Non-controllinginterest

attributableto ordinary

shareholders


attributableto preferenceshareholders

Totalshareholders'

equity

Balance at 31 December 2012 457 303 304 457 16 033 599 1 383 1 334 141 126 33 528 53 601 213 3 561 57 375shares issued in terms of employee incentive schemes 2 792 902 3 472 475 475shares no longer held by group entities 3 809 077 4 349 12 365 365shares acquired by group entities/BEE trusts (2 711 824) (3) (511) 17 (497) (497)sale of subsidiary – (3) (3)Preference shares held by group entities – (88) (88)Preference share dividend paid – (292) (292)Dividends paid to ordinary shareholders (3 821) (3 821) (9) (3 830)total comprehensive income for the period 673 222 32 9 368 10 295 45 292 10 632transfer (to)/from reserves (35) (28) (17) 10 70 – –share-based payments reserve movements 206 206 206Regulatory risk reserve provision (4) (4) (4)

Other movements (3) (3) (3)

Balance at 31 December 2013 461 193 459 461 16 343 1 237 1 577 1 523 147 158 39 171 60 617 246 3 473 64 336shares issued in terms of employee incentive schemes 3 670 463 4 767 771 771shares delisted – capital management (14 715 049) (15) (1 598) (1 613) (1 613)treasury shares no longer held by capital management 14 715 049 15 1 598 1 613 1 613shares (acquired)/no longer held by group entities/BEE trusts3 778 996 1 (329) 21 (307) (307)acquisition of additional shareholding in subsidiary – 8 8Preference shares sold by group entities – 88 88Preference share dividend paid – (323) (323)Dividends paid to ordinary shareholders (4 643) (4 643) (9) (4 652)total comprehensive income for the period 378 202 21 9 830 10 431 81 323 10 835transfer (to)/from reserves (38) (20) 13 (1) 46 – –share-based payments reserve movements 151 151 151Regulatory risk reserve provision 7 7 7


Balance at 31 December 2014 465 642 918 466 16 781 1 615 1 741 1 654 167 178 44 422 67 024 326 3 561 70 9111 Represents non-distributable reserves transferred from other distributable reserves in order to comply with the Bank’s Act 1990 and other non-distributable revaluation surplus on capital items.2 Represents appropriations of retained earnings to other non-distributable reserves.3 Shares acquired by group entities and BEE trusts (R749m), less shares that vested and no longer held (R420m).


15b

Rm

Number ofordinary

shares

Ordinaryshare

capital

Ordinaryshare

premium

Foreigncurrency

translationreserve

Propertyrevaluation

reserve

Share-basedpayments

reserve

Other non-distributable

reserves1Available-for-

sale reserve

Otherdistributable

reserves2

Total equityattributable toequity holders

of the parent


attributableto ordinary

shareholders


attributableto preferenceshareholders

Totalshareholders'

equity

Balance at 31 December 2012 457 303 304 457 16 033 599 1 383 1 334 141 126 33 528 53 601 213 3 561 57 375shares issued in terms of employee incentive schemes 2 792 902 3 472 475 475shares no longer held by group entities 3 809 077 4 349 12 365 365shares acquired by group entities/BEE trusts (2 711 824) (3) (511) 17 (497) (497)sale of subsidiary – (3) (3)Preference shares held by group entities – (88) (88)Preference share dividend paid – (292) (292)Dividends paid to ordinary shareholders (3 821) (3 821) (9) (3 830)total comprehensive income for the period 673 222 32 9 368 10 295 45 292 10 632transfer (to)/from reserves (35) (28) (17) 10 70 – –share-based payments reserve movements 206 206 206Regulatory risk reserve provision (4) (4) (4)


Balance at 31 December 2013 461 193 459 461 16 343 1 237 1 577 1 523 147 158 39 171 60 617 246 3 473 64 336shares issued in terms of employee incentive schemes 3 670 463 4 767 771 771shares delisted – capital management (14 715 049) (15) (1 598) (1 613) (1 613)treasury shares no longer held by capital management 14 715 049 15 1 598 1 613 1 613shares (acquired)/no longer held by group entities/BEE trusts3 778 996 1 (329) 21 (307) (307)acquisition of additional shareholding in subsidiary – 8 8Preference shares sold by group entities – 88 88Preference share dividend paid – (323) (323)Dividends paid to ordinary shareholders (4 643) (4 643) (9) (4 652)total comprehensive income for the period 378 202 21 9 830 10 431 81 323 10 835transfer (to)/from reserves (38) (20) 13 (1) 46 – –share-based payments reserve movements 151 151 151Regulatory risk reserve provision 7 7 7


Balance at 31 December 2014 465 642 918 466 16 781 1 615 1 741 1 654 167 178 44 422 67 024 326 3 561 70 9111 Represents non-distributable reserves transferred from other distributable reserves in order to comply with the Bank’s Act 1990 and other non-distributable revaluation surplus on capital items.2 Represents appropriations of retained earnings to other non-distributable reserves.3 Shares acquired by group entities and BEE trusts (R749m), less shares that vested and no longer held (R420m).

16b

REtURn On EqUity DRivERsfor the year ended 31 December

2014 2013 2014 2013

net interest income 22 961 21 220 net interest income/average interest-earning banking assets 3,52% Impairments/NII 3,57% impairments/niiless 19,6% less 26,3%

impairment of loans and advances (4 506) (5 565) impairments/average interest-earning banking assets 0,69% 0,94%add NIR/Expenses add niR/Expenses

non-interest revenue 20 312 19 361 non-interest revenue/average interest-earning banking assets 3,11% 82,8% 3,26% 86,4%

Income from normal operations 38 767 35 016 5,94% 5,89%less Efficiency ratio less Efficiency ratio

total operating expenses (24 534) (22 419) total expenses/average interest-earning banking assets 3,76% 56,5% 3,77% 55,2%

share of profits of associate companies and joint arrangements 161 27 associate income/average interest-earning banking assets

Net profit before taxation 14 394 12 624 2,18% 2,12%

indirect taxation (635) (601) multiply multiply

Direct taxation (3 487) (3 033) 1 – effective direct and indirect taxation rate 0,71 0,71

Net profit after taxation 10 272 8 990 multiply multiply

non-controlling interest (392) (320) income attributable to minorities 0,96 0,96

Headline earnings 9 880 8 670 headline earnings 1,49% 1,44%

Daily average interest-earning banking assets 652 194 594 715 interest-earning banking assets/daily average total assetsmultiply multiply

Daily average total assets 775 337 706 407 interest-earning banking assets/daily average total assets 84,1% 84,2%= =

Return on total assets 1,27% 1,23%multiply multiply

Daily average shareholders’ funds 62 677 55 508 gearing 12,37 12,73= =

Return on ordinary shareholders’ equity 15,8% 15,6%

Daily average shareholders’ funds, excluding goodwill 57 540 50 430 Return on ordinary shareholder’s equity, excluding goodwill 17,2% 17,2%

1 Averages calculated on a 365-day basis.


17b

2014 2013 2014 2013

net interest income 22 961 21 220 net interest income/average interest-earning banking assets 3,52% Impairments/NII 3,57% impairments/niiless 19,6% less 26,3%

impairment of loans and advances (4 506) (5 565) impairments/average interest-earning banking assets 0,69% 0,94%add NIR/Expenses add niR/Expenses

non-interest revenue 20 312 19 361 non-interest revenue/average interest-earning banking assets 3,11% 82,8% 3,26% 86,4%

Income from normal operations 38 767 35 016 5,94% 5,89%less Efficiency ratio less Efficiency ratio

total operating expenses (24 534) (22 419) total expenses/average interest-earning banking assets 3,76% 56,5% 3,77% 55,2%

share of profits of associate companies and joint arrangements 161 27 associate income/average interest-earning banking assets

Net profit before taxation 14 394 12 624 2,18% 2,12%

indirect taxation (635) (601) multiply multiply

Direct taxation (3 487) (3 033) 1 – effective direct and indirect taxation rate 0,71 0,71

Net profit after taxation 10 272 8 990 multiply multiply

non-controlling interest (392) (320) income attributable to minorities 0,96 0,96

Headline earnings 9 880 8 670 headline earnings 1,49% 1,44%

Daily average interest-earning banking assets 652 194 594 715 interest-earning banking assets/daily average total assetsmultiply multiply

Daily average total assets 775 337 706 407 interest-earning banking assets/daily average total assets 84,1% 84,2%= =

Return on total assets 1,27% 1,23%multiply multiply

Daily average shareholders’ funds 62 677 55 508 gearing 12,37 12,73= =

Return on ordinary shareholders’ equity 15,8% 15,6%

Daily average shareholders’ funds, excluding goodwill 57 540 50 430 Return on ordinary shareholder’s equity, excluding goodwill 17,2% 17,2%

1 Averages calculated on a 365-day basis.

18b

OPERatiOnal sEgMEntal REPORtingfor the year ended 31 December

Nedbank Group Nedbank Capital Nedbank CorporateNedbank Retail and

Business Banking Nedbank Retail Nedbank Business Banking Nedbank Wealth Rest of Africa Division2 Centre2

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Consolidated statement of financial position (Rm)Assetscash and cash equivalents 28 250 34 073 2 619 10 986 3 435 2 755 2 932 2 616 2 932 2 616 934 1 706 3 328 2 779 15 002 13 231Other short-term securities 67 234 42 451 29 414 30 969 9 943 6 847 1 849 958 26 028 3 677Derivative financial instruments 15 573 13 390 15 551 13 327 (52) (52) 1 2 24 20 49 93government and other securities 27 177 32 091 10 084 9 635 5 926 6 117 377 379 377 379 336 709 10 454 15 251loans and advances 613 021 579 372 105 601 109 549 199 557 175 274 268 882 258 220 203 063 195 435 65 819 62 785 24 819 22 082 14 073 14 700 89 (453)Other assets 58 058 48 217 4 903 6 242 4 203 4 269 5 888 5 014 5 532 4 725 356 289 21 912 20 274 7 818 951 13 334 11 467intergroup assets 45 761 36 142 45 761 36 142 (45 761) (36 142)Total assets 809 313 749 594 168 172 180 708 213 069 188 363 323 840 302 371 211 904 203 155 111 936 99 216 57 609 50 911 27 428 20 117 19 195 7 124Equity and liabilitiestotal equity 70 911 64 336 6 891 5 863 10 606 8 514 27 565 26 683 22 109 21 903 5 456 4 780 2 830 2 487 3 549 1 998 19 470 18 791Derivative financial instruments 15 472 16 580 15 429 16 546 4 1 47 27 (8) 6amounts owed to depositors 653 450 602 952 137 391 106 226 182 009 176 234 224 103 201 928 118 134 107 931 105 969 93 997 26 122 21 704 17 058 14 406 66 767 82 454Provisions and other liabilities 33 842 32 458 6 626 6 372 1 558 2 042 3 373 3 002 2 862 2 563 511 439 17 626 16 560 876 566 3 783 3 916long-term debt instruments 35 638 33 268 1 159 1 051 1 775 1 994 4 4 32 700 30 219intergroup liabilities 676 44 650 18 896 1 573 67 024 68 764 67 024 68 764 11 027 10 159 5 894 3 116 (103 517) (128 262)Total equity and liabilities 809 313 749 594 168 172 180 708 213 069 188 363 323 840 302 371 211 904 203 155 111 936 99 216 57 609 50 911 27 428 20 117 19 195 7 124Consolidated statement of comprehensive income (Rm)net interest income 22 961 21 220 1 937 1 608 3 982 3 525 15 216 14 314 11 720 11 206 3 496 3 108 628 531 898 801 300 441impairments charge on loans and advances 4 506 5 565 106 306 400 385 3 771 4 765 3 500 4 355 271 410 41 59 35 50 153income from lending activities 18 455 15 655 1 831 1 302 3 582 3 140 11 445 9 549 8 220 6 851 3 225 2 698 587 472 863 751 147 441non-interest revenue 20 312 19 361 3 206 3 078 2 256 1 944 10 530 10 380 8 820 8 651 1 710 1 729 3 399 3 081 768 675 153 203Operating income 38 767 35 016 5 037 4 380 5 838 5 084 21 975 19 929 17 040 15 502 4 935 4 427 3 986 3 553 1 631 1 426 300 644total operating expenses 24 534 22 419 2 256 2 156 2 408 2 169 16 076 14 824 12 689 11 705 3 387 3 119 2 484 2 218 1 256 1 126 54 (74)indirect taxation 635 601 68 36 6 32 243 242 215 217 28 25 102 108 30 23 186 160Profit/(loss) from operations 13 598 11 996 2 713 2 188 3 424 2 883 5 656 4 863 4 136 3 580 1 520 1 283 1 400 1 227 345 277 60 558share of profits of associate companies and joint arrangements 161 27 12 26 (1) 149 2Profit/(loss) before direct taxation 13 759 12 023 2 713 2 188 3 436 2 909 5 656 4 863 4 136 3 580 1 520 1 283 1 400 1 226 494 277 60 560Direct taxation 3 487 3 033 572 473 837 664 1 562 1 357 1 136 1 003 426 354 358 326 85 64 73 149Profit/(loss) after taxation 10 272 8 990 2 141 1 715 2 599 2 245 4 094 3 506 3 000 2 577 1 094 929 1 042 900 409 213 (13) 411Profit attributable to non-controlling interest:– Ordinary shareholders 69 28 13 (11) 52 40 4 (1)– Preference shareholders 323 292 63 38 63 38 260 254Headline earnings 9 880 8 670 2 128 1 726 2 599 2 245 4 031 3 468 2 937 2 539 1 094 929 1 042 900 357 173 (277) 158Selected ratiosaverage interest-earning banking assets (Rm) 652 194 594 715 117 151 97 506 193 751 173 642 306 401 289 113 198 343 193 027 108 058 96 086 32 351 27 455 18 920 17 207 (16 380) (10 208)Return on assets (%) 1,27 1,23 1,18 1,11 1,30 1,25 1,24 1,16 1,42 1,27 1,01 0,96 1,91 1,95 1,58 0,90Return on equity (%) 15,8 15,6 30,9 29,4 24,5 26,4 14,6 13,0 13,3 11,6 20,1 19,4 36,8 36,2 10,1 8,7interest margin (%)1 3,52 3,57 1,65 1,65 2,06 2,03 4,97 4,95 5,91 5,81 3,24 3,24 1,94 1,93 4,75 4,66non-interest revenue to total income (%) 46,9 47,7 62,3 65,7 36,2 35,5 40,9 42,0 42,9 43,6 32,9 35,7 84,4 85,3 46,1 45,7non-interest revenue to total operating expenses (%) 82,8 86,4 142,1 142,7 93,7 89,7 65,5 70,0 69,5 73,9 50,5 55,4 136,9 138,9 61,2 59,9credit loss ratio – banking advances (%) 0,79 1,06 0,14 0,51 0,21 0,23 1,39 1,80 1,70 2,16 0,42 0,65 0,17 0,28 0,23 0,37Efficiency ratio3 56,5 55,2 43,9 46,0 38,5 39,5 62,4 60,0 61,8 58,9 65,1 64,5 61,7 61,4 69,2 76,3Effective taxation rate (%) 25,3 25,2 21,1 21,6 24,4 22,8 27,6 27,9 27,5 28,0 28,0 27,6 25,6 26,6 17,2 23,1contribution to group economic profit/(loss) (Rm) 2 112 2 114 1198 963 1 167 1138 310 (48) (308) 358 308 660 577 (122) (87) (1 101) (477)number of employees (excl temps) 30 499 29 513 665 683 2 123 2 186 20 373 19 499 18 026 17 153 2 347 2 346 2 119 2 056 1 605 1 501 3 614 3 5881 Cluster margins include internal assets.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central Managements including Rest of Africa’ and ‘Shared Services’ were reported as a separate division. We now report ‘Rest of Africa division’

as a separate division and combine ‘Shared Services’ with ‘Central Management’ as ‘Centre’.3 Ratio include associate income to align better with industry practice.


19b



2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Consolidated statement of financial position (Rm)Assetscash and cash equivalents 28 250 34 073 2 619 10 986 3 435 2 755 2 932 2 616 2 932 2 616 934 1 706 3 328 2 779 15 002 13 231Other short-term securities 67 234 42 451 29 414 30 969 9 943 6 847 1 849 958 26 028 3 677Derivative financial instruments 15 573 13 390 15 551 13 327 (52) (52) 1 2 24 20 49 93government and other securities 27 177 32 091 10 084 9 635 5 926 6 117 377 379 377 379 336 709 10 454 15 251loans and advances 613 021 579 372 105 601 109 549 199 557 175 274 268 882 258 220 203 063 195 435 65 819 62 785 24 819 22 082 14 073 14 700 89 (453)Other assets 58 058 48 217 4 903 6 242 4 203 4 269 5 888 5 014 5 532 4 725 356 289 21 912 20 274 7 818 951 13 334 11 467intergroup assets 45 761 36 142 45 761 36 142 (45 761) (36 142)Total assets 809 313 749 594 168 172 180 708 213 069 188 363 323 840 302 371 211 904 203 155 111 936 99 216 57 609 50 911 27 428 20 117 19 195 7 124Equity and liabilitiestotal equity 70 911 64 336 6 891 5 863 10 606 8 514 27 565 26 683 22 109 21 903 5 456 4 780 2 830 2 487 3 549 1 998 19 470 18 791Derivative financial instruments 15 472 16 580 15 429 16 546 4 1 47 27 (8) 6amounts owed to depositors 653 450 602 952 137 391 106 226 182 009 176 234 224 103 201 928 118 134 107 931 105 969 93 997 26 122 21 704 17 058 14 406 66 767 82 454Provisions and other liabilities 33 842 32 458 6 626 6 372 1 558 2 042 3 373 3 002 2 862 2 563 511 439 17 626 16 560 876 566 3 783 3 916long-term debt instruments 35 638 33 268 1 159 1 051 1 775 1 994 4 4 32 700 30 219intergroup liabilities 676 44 650 18 896 1 573 67 024 68 764 67 024 68 764 11 027 10 159 5 894 3 116 (103 517) (128 262)Total equity and liabilities 809 313 749 594 168 172 180 708 213 069 188 363 323 840 302 371 211 904 203 155 111 936 99 216 57 609 50 911 27 428 20 117 19 195 7 124Consolidated statement of comprehensive income (Rm)net interest income 22 961 21 220 1 937 1 608 3 982 3 525 15 216 14 314 11 720 11 206 3 496 3 108 628 531 898 801 300 441impairments charge on loans and advances 4 506 5 565 106 306 400 385 3 771 4 765 3 500 4 355 271 410 41 59 35 50 153income from lending activities 18 455 15 655 1 831 1 302 3 582 3 140 11 445 9 549 8 220 6 851 3 225 2 698 587 472 863 751 147 441non-interest revenue 20 312 19 361 3 206 3 078 2 256 1 944 10 530 10 380 8 820 8 651 1 710 1 729 3 399 3 081 768 675 153 203Operating income 38 767 35 016 5 037 4 380 5 838 5 084 21 975 19 929 17 040 15 502 4 935 4 427 3 986 3 553 1 631 1 426 300 644total operating expenses 24 534 22 419 2 256 2 156 2 408 2 169 16 076 14 824 12 689 11 705 3 387 3 119 2 484 2 218 1 256 1 126 54 (74)indirect taxation 635 601 68 36 6 32 243 242 215 217 28 25 102 108 30 23 186 160Profit/(loss) from operations 13 598 11 996 2 713 2 188 3 424 2 883 5 656 4 863 4 136 3 580 1 520 1 283 1 400 1 227 345 277 60 558share of profits of associate companies and joint arrangements 161 27 12 26 (1) 149 2Profit/(loss) before direct taxation 13 759 12 023 2 713 2 188 3 436 2 909 5 656 4 863 4 136 3 580 1 520 1 283 1 400 1 226 494 277 60 560Direct taxation 3 487 3 033 572 473 837 664 1 562 1 357 1 136 1 003 426 354 358 326 85 64 73 149Profit/(loss) after taxation 10 272 8 990 2 141 1 715 2 599 2 245 4 094 3 506 3 000 2 577 1 094 929 1 042 900 409 213 (13) 411Profit attributable to non-controlling interest:– Ordinary shareholders 69 28 13 (11) 52 40 4 (1)– Preference shareholders 323 292 63 38 63 38 260 254Headline earnings 9 880 8 670 2 128 1 726 2 599 2 245 4 031 3 468 2 937 2 539 1 094 929 1 042 900 357 173 (277) 158Selected ratiosaverage interest-earning banking assets (Rm) 652 194 594 715 117 151 97 506 193 751 173 642 306 401 289 113 198 343 193 027 108 058 96 086 32 351 27 455 18 920 17 207 (16 380) (10 208)Return on assets (%) 1,27 1,23 1,18 1,11 1,30 1,25 1,24 1,16 1,42 1,27 1,01 0,96 1,91 1,95 1,58 0,90Return on equity (%) 15,8 15,6 30,9 29,4 24,5 26,4 14,6 13,0 13,3 11,6 20,1 19,4 36,8 36,2 10,1 8,7interest margin (%)1 3,52 3,57 1,65 1,65 2,06 2,03 4,97 4,95 5,91 5,81 3,24 3,24 1,94 1,93 4,75 4,66non-interest revenue to total income (%) 46,9 47,7 62,3 65,7 36,2 35,5 40,9 42,0 42,9 43,6 32,9 35,7 84,4 85,3 46,1 45,7non-interest revenue to total operating expenses (%) 82,8 86,4 142,1 142,7 93,7 89,7 65,5 70,0 69,5 73,9 50,5 55,4 136,9 138,9 61,2 59,9credit loss ratio – banking advances (%) 0,79 1,06 0,14 0,51 0,21 0,23 1,39 1,80 1,70 2,16 0,42 0,65 0,17 0,28 0,23 0,37Efficiency ratio3 56,5 55,2 43,9 46,0 38,5 39,5 62,4 60,0 61,8 58,9 65,1 64,5 61,7 61,4 69,2 76,3Effective taxation rate (%) 25,3 25,2 21,1 21,6 24,4 22,8 27,6 27,9 27,5 28,0 28,0 27,6 25,6 26,6 17,2 23,1contribution to group economic profit/(loss) (Rm) 2 112 2 114 1198 963 1 167 1138 310 (48) (308) 358 308 660 577 (122) (87) (1 101) (477)number of employees (excl temps) 30 499 29 513 665 683 2 123 2 186 20 373 19 499 18 026 17 153 2 347 2 346 2 119 2 056 1 605 1 501 3 614 3 5881 Cluster margins include internal assets.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central Managements including Rest of Africa’ and ‘Shared Services’ were reported as a separate division. We now report ‘Rest of Africa division’

as a separate division and combine ‘Shared Services’ with ‘Central Management’ as ‘Centre’.3 Ratio include associate income to align better with industry practice.

20b

gEOgRaPhical sEgMEntal REPORting

Nedbank Group South Africa1 Rest of Africa2 Rest of world

Rm 2014 2013 2014 2013 2014 2013 2014 2013

Consolidated statement of financial positionAssetscash and cash equivalents 28 250 34 073 23 746 27 773 3 368 2 821 1 136 3 479Other short-term securities 67 234 42 451 56 061 34 645 1 849 958 9 324 6 848Derivative financial instruments 15 573 13 390 14 843 13 044 24 20 706 326government and other securities 27 177 32 091 22 680 27 298 336 709 4 161 4 084loans and advances 613 021 579 372 560 603 531 564 14 153 12 126 38 265 35 682Other assets 58 058 48 217 46 066 43 478 7 818 901 4 174 3 838

intergroup assets (57 021) (17 260) 2 497 1 794 54 524 15 466

Total assets 809 313 749 594 666 978 660 542 30 045 19 329 112 290 69 723

Equity and liabilitiestotal equity 70 911 64 336 60 257 55 290 3 552 2 690 7 102 6 356Derivative financial instruments 15 472 16 580 14 714 15 968 27 27 731 585amounts owed to depositors 653 450 602 952 594 474 556 027 17 058 14 406 41 918 32 519Provisions and other liabilities 33 842 32 458 32 427 31 456 868 569 547 433long-term debt instruments 35 638 33 268 35 634 33 264 4 4

intergroup liabilities (70 528) (31 463) 8 538 1 633 61 992 29 830

Total equity and liabilities 809 313 749 594 666 978 660 542 30 045 19 329 112 290 69 723

Consolidated statement of comprehensive incomenet interest income 22 961 21 220 21 338 19 892 961 799 662 529

impairments charge on loans and advances 4 506 5 565 4 176 5 290 50 43 280 232

income from lending activities 18 455 15 655 17 162 14 602 911 756 382 297

non-interest revenue 20 312 19 361 18 783 18 119 738 671 791 571

Operating income 38 767 35 016 35 945 32 721 1 649 1 427 1 173 868Operating expenses 24 534 22 419 22 819 20 985 1 034 898 681 536

indirect taxation 635 601 597 568 29 22 9 11

Profit from operations 13 598 11 996 12 529 11 168 586 507 483 321

share of profits of associate companies and joint arrangements 161 27 12 27 149

Profit before direct taxation 13 759 12 023 12 541 11 195 735 507 483 321

Direct taxation 3 487 3 033 3 268 2 861 152 132 67 40

Profit after taxation 10 272 8 990 9 273 8 334 583 375 416 281Profit attributable to non-controlling interest:– Ordinary shareholders 69 28 17 (12) 52 40


Headline earnings 9 880 8 670 8 933 8 054 531 335 416 2811 Includes all group eliminations.2 Geographical split is based on the legal company structure.


21b

Nedbank Group South Africa1 Rest of Africa2 Rest of world

Rm 2014 2013 2014 2013 2014 2013 2014 2013

Consolidated statement of financial positionAssetscash and cash equivalents 28 250 34 073 23 746 27 773 3 368 2 821 1 136 3 479Other short-term securities 67 234 42 451 56 061 34 645 1 849 958 9 324 6 848Derivative financial instruments 15 573 13 390 14 843 13 044 24 20 706 326government and other securities 27 177 32 091 22 680 27 298 336 709 4 161 4 084loans and advances 613 021 579 372 560 603 531 564 14 153 12 126 38 265 35 682Other assets 58 058 48 217 46 066 43 478 7 818 901 4 174 3 838

intergroup assets (57 021) (17 260) 2 497 1 794 54 524 15 466

Total assets 809 313 749 594 666 978 660 542 30 045 19 329 112 290 69 723

Equity and liabilitiestotal equity 70 911 64 336 60 257 55 290 3 552 2 690 7 102 6 356Derivative financial instruments 15 472 16 580 14 714 15 968 27 27 731 585amounts owed to depositors 653 450 602 952 594 474 556 027 17 058 14 406 41 918 32 519Provisions and other liabilities 33 842 32 458 32 427 31 456 868 569 547 433long-term debt instruments 35 638 33 268 35 634 33 264 4 4

intergroup liabilities (70 528) (31 463) 8 538 1 633 61 992 29 830

Total equity and liabilities 809 313 749 594 666 978 660 542 30 045 19 329 112 290 69 723

Consolidated statement of comprehensive incomenet interest income 22 961 21 220 21 338 19 892 961 799 662 529

impairments charge on loans and advances 4 506 5 565 4 176 5 290 50 43 280 232

income from lending activities 18 455 15 655 17 162 14 602 911 756 382 297

non-interest revenue 20 312 19 361 18 783 18 119 738 671 791 571

Operating income 38 767 35 016 35 945 32 721 1 649 1 427 1 173 868Operating expenses 24 534 22 419 22 819 20 985 1 034 898 681 536

indirect taxation 635 601 597 568 29 22 9 11

Profit from operations 13 598 11 996 12 529 11 168 586 507 483 321

share of profits of associate companies and joint arrangements 161 27 12 27 149

Profit before direct taxation 13 759 12 023 12 541 11 195 735 507 483 321

Direct taxation 3 487 3 033 3 268 2 861 152 132 67 40

Profit after taxation 10 272 8 990 9 273 8 334 583 375 416 281Profit attributable to non-controlling interest:– Ordinary shareholders 69 28 17 (12) 52 40


Headline earnings 9 880 8 670 8 933 8 054 531 335 416 2811 Includes all group eliminations.2 Geographical split is based on the legal company structure.

22b

Broad overview of the various

clusters making up Nedbank Group’s core

business.

nEDBank CAPITAlcomprehensive investment banking solutions to institutional and corporate clients.

Product strengths include investment banking, leverage financing, trading, broking, structuring and hedging.

Offices in sa and london and representative offices in angola and toronto.

Primary units: ■ investment banking ■ global markets ■ treasury ■ client coverage and

origination

nEDBank CORPORATElending, deposit-taking, transactional banking to sa corporates with turnover > R700m pa and commercial

property finance.

nEDBank BuSINESS BANKINGcommercial banking solutions for small- to-medium-sized businesses with turnover of R10m – R700m pa.

holistic offering for the business, business owners/households and employees.

BuSINESS PROfIlE

kEy STRATEGIC

DRIVERS

■ strong investment banking pipeline with more cross-sell across businesses.

■ strategic growth in africa and leverage Ecobank, Bank of china and canadian imperial Bank of commerce (ciBc)

■ leveraging industry expertise.

■ leveraging trading systems.

■ leveraging leadership in renewable energy.

■ strong client relationships.

■ continued product and niR growth through enhanced capabilities and primary client growth.

■ increased Pan-african focus.

■ strong risk management.

■ a choice of distinctive client-centred banking experiences.

■ a rigorous approach to capturing virtuous circle and interdependencies between client segments.

■ integrated channels strategy leveraging mobile innovation, digital channels and social media; selected micro markets for growth /optimisation; area collaboration.


23b

sEgMEntal cOMMEntaRy

nEDBank RETAIla bank for all financial needs of individuals and small businesses <R10m turnover pa.

transactional, card, lending, deposit-taking, risk management and investment products/services, as well as card-acquiring services for business.

nEDBank WEAlTHProviding broad-based financial services and solutions of wealth management, asset management and insurance to clients of nedbank group.

Offices in sa, london, isle of Man, Jersey, guernsey and the UaE.

REST Of AfRICA DivisiOnthe Rest of africa Division has operations in lesotho, Malawi, namibia, swaziland and Zimbabwe (MBca) and operates representatives office in kenya and angola.

the division has investments in Banco Único (Mozambique) and Ecobank (togo). Rest of africa is the custodian of the Ecobank–nedbank alliance.

■ simplification and operational efficiencies.

■ investment in profiling, presence and self-help capability.

■ Driving growth and unlocking collaboration potential.

■ Broaden financial services franchise.

■ creating a Pan-african banking network by utilising our tiered approach for expansion into the rest of africa, which includes leveraging our investment in Ecobank.

■ Optimising economic profit through strategic portfolio tilt.

■ Optimising and invest initiatives.

■ it systems rationalisation and replacement.

■ Risk-based economics (economic capital allocation, funds transfer pricing, liquidity premiums and risk-adjusted performance management) embedded groupwide in the business.

For detailed information on our business activities and strategy, please see the supplementary information

available at nedbankgroup.co.za or through the Nedbank App SuitetM.

■ Robust risk management supporting strong product niches.

■ liabilities innovation sustaining historical strength.

■ collaborative, people-centred culture.

24b

sEgMEntal cOMMEntaRy (continued)

NEDBANK CORPORATE

Financial highlightsTotal Corporate Banking Property finance Other1

2014 2013 2014 2013 2014 2013 2014 2013

headline earnings (Rm) 2 599 2 245 1 210 1 197 1 318 945 71 103Return on equity (%) 24,5 26,4 23,5 28,4 27,5 26,1

Return on assets (%) 1,30 1,25 0,57 0,59 1,11 0,93credit loss ratio (%) 0,21 0,23 0,22 0,19 0,21 0,27non-interest revenue to total expenses (%) 93,7 89,7 67,2 72,7 139,6 107,3Efficiency ratio (%) 38,5 39,5 47,6 45,2 25,1 29,3interest margin (%) 2,06 2,03 1,05 1,02 1,54 1,51impairments charge on loans and advances (Rm) 400 385 192 155 208 230total assets (Rm) 213 069 188 363 206 967 202 912 139 595 111 339 (133 493) (125 888)average total assets (Rm) 199 969 178 926 213 433 203 397 118 835 102 051 (132 299) (126 522)total advances (Rm) 199 557 175 274 87 078 81 056 109 134 92 634 3 345 1 584average total advances (Rm) 188 271 167 817 85 933 81 374 99 644 84 404 2 694 2 039total deposits (Rm) 182 009 176 234 176 157 171 814 1 947 2 258 3 905 2 162average total deposits (Rm) 181 251 166 658 176 406 162 000 2 073 1 721 2 772 2 937allocated capital (Rm) 10 606 8 514 5 140 4 213 4 788 3 625 678 6761 Includes Centralised Credit, Risk, Human Resources, Finance, Shared Services, Transactional Banking and eliminations.

nedbank corporate delivered growth in headline earnings of 15,8% to R2 599m (2013: R2 245m) and generated a return on equity (ROE) of 24,5% (2013: 26,4%). the increase in headline earnings was underpinned by continued advances growth as well as strong growth in core non-interest revenue (niR). Economic profit remained largely flat at R1 167m (2013: R1 138m) as a result of higher economic capital due to increased credit growth as well as a higher cost of capital during the review period.

net interest income (nii) was 13,0% higher at R3 982m (2013: R3 525m), with the margin improving by 3 basis points to 2,06% and a 12,2% increase in average advances to R188bn. this was driven by strong commercial mortgage growth due to the drawdown of deals booked in 2013, as well as new growth. average deposits increased 8,8% to R181bn.

impairments increased marginally to R400m (2013: R385m). the credit loss ratio (clR) decreased to 0,21% as a result of good risk management across the portfolio despite the tough environment and the increased

provisioning on a single large counter. this is at the bottom end of our through-the-cycle target range of 0,20% to 0,35%. Defaulted advances declined 7,1% to R2 550m (2013: R2 745m).

the niR/Expense ratio increased to 93,7%, with total niR growing by 16,0% to R2 256m (2013: R1 944m), despite the negative year-on-year fair-value movement of R226m. Property investment niR increased to R602m (2013: R239m) due to higher investment income from the profit realised on the sale of listed stock, as well as revaluations. core niR grew 11,4% as a result of increased transactional volumes.

total expenses grew 11,0% in line with revenue growth, with the efficiency ratio reducing year on year to 38,6%.

the pooling of expertise and coordination of origination efforts though the integration of corporate Banking's Debt structuring and nedbank capital's acquisition and leveraged Finance teams paid dividends, with large-ticket deals being closed out. this initiative was a valuable

Headline earnings (Rm)HEADLINE EARNINGS

20142013201220112010

2 59

9

2 24

5

1 817

1 571

1 357

Return on equityRETURN ON EQUITY

20142013201220112010

24,5

26,4

22,5

24,5

20,4


25b

precursor to the merger of nedbank corporate and nedbank capital announced in the last quarter, and laid a firm foundation for extracting further material benefits from the amalgamation in 2015 and beyond.

Our standards of client service and efficiency were acknowledged in a quality award from Deutsche Bank for crossborder payment processing, while nedbank investor services was again rated as the best subcustodian bank in sa by Global Finance magazine.

transactional Banking has continued to provide new innovative solutions to clients, rolling out the exclusive cash Online™ solution to non-nedbank clients. Further development in value-added services was reflected in the launch of account verification services in real time (avs-R™), an industry-first and market leader in 2014. Mobile banking remained a focus area, with good takeup of its functionality.

client feedback confirmed that security remained a high priority for electronic banking and in response we, in partnership with global leader gemalto™, launched a new and innovative security token, Plug and transact™, which provides a superior security solution.

We increased our investment in our people strategies and behavioural and functional excellence of leaders at senior- and middle-management levels. in driving a high-performance culture with best-of-breed people in client-facing roles, we have focused on customised programmes such as the corporate Banking Excellence Programme in partnership with Duke University corporate Education, the Forex and Property Finance academies and the first-class Dealmaker programmes.

Corporate Banking's headline earnings in 2014 were flat, with a marginal increase of 1,1%, largely due to an impairment on a single client (R181m)

and a negative year-on-year fair-value movement of R76m. ROE decreased to 23,5% (2013: 28,4%).

in 2014 we saw intensified competition among peers for quality assets and transactional revenue. this resulted in modest average advances growth of 5,6% to R85,9bn. average deposits grew 8,9% to R176,4bn. nii grew 8,9% as a result of advances volume and rate increases, as well as higher endowment income.

core niR grew 12,5% in line with our strategy of growing our transactional franchise.

the division's clR increased from 0,19% in 2013 to 0,22%. the cost-to-income ratio increased to 47,6% (2013: 45,2%).

Property finance recorded a 39,5% increase in headline earnings to R1 318m (2013: R945m). nii growth of R271m due to higher lending volumes, as well as an increase in niR of 38,5% to R953m, contributed to the substantial increase in headline earnings. this was due to property investment niR increasing as mentioned earlier, despite the negative year-on-year fair-value movement of R150m. ROE for the year increased to 27,5% (2013: 26,1%). Property Finance continued to experience good asset growth, with average advances increasing by 18,1% to R99,6bn.

the cost-to-income ratio improved to 25,1% from 29,3% in 2013. impairments decreased by 9,6% as defaulted advances declined. the impairments charge at 0,21% was the lowest it had been over the past five years, in part due to resolution of some long-outstanding problem accounts, while levels of non-performing assets showed steady improvement.

favourable unfavourable

■ net interest growth driven by strong commercial mortgage advances growth.

■ good core niR growth, driven by increased transactional volumes. ■ increased Property Finance niR due to profit realised. ■ Reduced defaulted advances and improved clR. ■ successful integration of corporate Banking’s Debt structuring and

nedbank capital’s acquisition and leveraged Finance teams.

■ ROE year on year declined partly due to higher economic capital and cost of capital, combined with lower earnings growth in corporate Banking.

■ negative impact on corporate Banking headline earnings growth by a large single impairment as well as a negative year-on-year fair-value movement.

26b

sEgMEntal cOMMEntaRy (continued)

NEDBANK CAPITAl

Financial highlights2014 2013

headline earnings (Rm) 2 128 1 726Return on equity (%) 30,9 29,4Return on assets (%) 1,18 1,11credit loss ratio (%) 0,14 0,51non-interest revenue to total expenses (%) 142,1 142,7Efficiency ratio (%) 43,9 46,0impairments charge on loans and advances (Rm) 106 306total assets (Rm) 168 172 180 708average total assets (Rm) 179 629 155 359total advances (Rm) 105 601 109 549average total advances (Rm) 108 880 92 699total deposits (Rm) 137 391 106 226average total deposits (Rm) 121 145 98 272allocated capital (Rm) 6 891 5 863

nedbank capital produced another strong set of results in 2014, achieving a return on equity (ROE) of 30,9% (2013: 29,4%), and grew headline earnings by 23,3% to R2 128m (2013: R1 726m). Economic profit (EP) increased by 24,3% to R1 198m (2013: R963m).

net interest income (nii) grew to R1 936m (2013: R1 608m), underpinned by 20,2% growth in our interest-earning banking book, with asset margins remaining constant at 1,65% (2013: 1,65%). Banking advances book growth was a result of good pipeline conversion rates across our sector-focused businesses. Our lending margin declined to 2,4% (2013: 2,6%), impacted by growth in the dollar-denominated book as well as the continued weakening of the rand against major currencies during 2014.

the credit loss ratio (clR) improved to 0,14% (2013: 0,51%) as a result of proactive recovery processes and disciplined risk management. the clR is within nedbank capital's through-the-cycle target range.

non-interest revenue (niR) increased to R3 206m (2013: R3 078m). trading income grew by 2,4% to R2 404m (2013: R2 347m), while private-equity income increased by 152,6% to R160m (2013: R63m) as a result of realised gains and revaluations. commission and fees were relatively flat at R613m (2013: R614m).

total expenses increased by 4,6% to R2 256m (2013: R2 156m) following prudent cost management and continued investment in the cluster's infrastructure and key specialist skills, particularly with the expansion of our presence in the rest of africa.

the effective tax rate decreased marginally to 21,1% (2013: 21,6%). Our efficiency ratio of 43,9% and our niR/Expense ratio of 142,1% are supportive of the group's strategic focus areas.

Headline earnings

HEADLINE EARNINGS

20142013201220112010

2 12

8

1 726

1 431

1 228

1 202

Return on equity

RETURN ON EQUITY

20142013201220112010

30,9

29,4

25,4

22,6

23,5

favourable unfavourable

■ strong financial performance from all businesses. ■ collaboration across nedbank and with alliances. ■ Efficient management of costs and systems to enhance business

productivity. ■ continued investment in people and talent management.

■ Margin compression in foreign exchange trading income. ■ increased competition from both local and international banks.


27b

Looking forwardthe primary drivers for integrating nedbank capital and nedbank corporate are to grow revenue and capture opportunities by putting our clients at the centre of our universe.

the relationship management and client coverage pillar will achieve this by providing a seamless interface that can coordinate the product pillars to create value-adding solutions for our clients.

the four product pillars, transactional services, financing and advisory, markets, and property finance, are well established and have grown significantly over the last few years, generating excellent returns for shareholders. the strength of our combined balance sheet will assist us to originate and lead large sector deals, driving growth across the group.

in terms of geographic reach we will continue to capture opportunities in the rest of africa by offering holistic solutions as our clients expand beyond sa borders, while working closely with our strategic partners, Ecobank, Banco Único, Bank of china and ciBc.

all of our growth initiatives are underpinned by prudent cost management and centralised support functions to eliminate duplications, with continued investment in systems to enhance productivity and regulatory compliance.

nedbank corporate and investment Bank has excellent people and cohesive teams that have worked together for a long time, as well as excellent indepth client knowledge and relationships that will play a key role in helping to develop the continent going forward.

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NEDBANK CORPORATE AND INVESTmENT BANK

ReLATiONSHiP mANAgemeNT ANd cLieNT cOveRAge

STRATEGIC PARTNERS: ecObANk, bANcO ÚNicO, bANk OF cHiNA, cibc

NEDBANK CORPORATE AND INVESTmENT BANK

Financial highlights2014 2013

headline earnings (Rm) 4 727 3 971Return on equity (%) 27,0 27,6Return on assets (%) 1,24 1,08credit loss ratio (%) 0,19 0,30non-interest revenue to total expenses (%) 117,1 116,1Efficiency ratio (%) 41,0 42,6impairments charge on loans and advances (Rm) 506 691total assets (Rm) 381 241 369 070average total assets (Rm) 379 598 334 285total advances (Rm) 305 158 284 823average total advances (Rm) 297 151 260 516total deposits (Rm) 319 400 282 460average total deposits (Rm) 302 396 264 930allocated capital (Rm) 17 497 14 377

28b

segmental commentary (continued)

NedbaNk Retail aNd busiNess baNkiNg

FInancIal HIgHlIgHtsfor the year ended 31 December

total Nedbank Retail and business banking

total Nedbank business banking total Nedbank Retail Home loans MFC Personal loans Card

transactional and investment Other

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Headline earnings (rm) 4 031 3 468 1 094 929 2 937 2 539 646 385 1 042 1 065 624 432 863 859 (86) (94) (152) (108)return on equity (%) 14,6 13,0 20,1 19,4 13,3 11,6 12,6 7,7 14,3 14,5 17,9 11,2 28,2 30,9 (3,0) (3,5) 12return on assets (%) 1,24 1,16 1,01 0,96 1,42 1,27 0,64 0,38 1,53 1,75 3,36 1,97 5,43 6,30 (4,75) (4,91)credit loss ratio (%) 1,39 1,80 0,42 0,65 1,70 2,16 0,09 0,33 1,21 1,17 10,02 12,23 4,84 4,86 3,16 4,18non-interest revenue to total expenses (%) 65,5 70,0 50,5 55,4 69,5 73,9 22,3 20,1 49,4 45,7 69,0 95,1 127,8 131,2 58,8 62,2 16,4 (21,9)efficiency ratio (%) 62,4 60,0 65,1 64,5 61,8 58,9 51,3 53,6 32,9 32,6 31,2 26,6 57,9 56,5 100,5 100,4 (14,5) 49,1Interest margin (%) 4,97 4,95 3,24 3,24 5,91 5,81 1,81 1,67 4,50 4,82 17,03 15,10 7,96 8,21 2,38 2,24Impairments charge on loans and advances (rm) 3 771 4 765 271 410 3 500 4 355 97 345 853 729 1 879 2 666 604 530 67 85total advances (rm) 268 882 258 220 65 819 62 785 203 063 195 435 101 023 100 016 73 488 65 552 14 709 17 575 12 253 10 465 1 554 1 786 36 41average total advances (rm) 261 937 254 523 63 969 61 590 197 968 192 933 100 690 101 625 68 015 60 706 16 239 19 256 11 656 9 979 1 810 1 914 (442) (547)total deposits (rm) 224 103 201 928 105 969 93 997 118 134 107 931 1 44 3 3 1 377 1 095 116 695 106 734 14 99average total deposits (rm) 212 806 191 982 102 265 91 085 110 541 100 897 6 55 86 104 1 590 1 042 108 776 99 664 28 87

allocated capital (rm) 27 565 26 683 5 456 4 780 22 109 21 903 5 129 5 022 7 296 7 322 3 484 3 853 3 066 2 780 2 830 2 702 304 224

retaIl anD BusIness BankIngretail and Business Banking delivered a 16,2% increase in headline earnings to r4 031m (2013: r3 468m) at a return on equity (roe) of 14,6% (2013: 13,0%) on an allocated economic capital ratio of 10,2%. these results reflect the consequence of delivering on our strategic choices:

■ quality origination across all asset classes at appropriate risk-based pricing with a continued focus on responsible credit extension and collections, thereby improving the overall health of our book;

■ a conservative risk appetite in personal loans, leading to lower levels of new business and a corresponding lower level of unsecured advances during 2014;

■ continued investment in distribution, marketing and client-centered innovation to ensure long-term sustainability and future growth;

■ pricing at 2013 levels or better, combined with a move to simplify products and pricing rules and align cash pricing to the market for business clients, which has reduced non-interest revenue (nIr) growth; and

■ active cost management focused on consolidation of roles, removal of duplication and extracting efficiencies from increased technology enablement.

Both businesses benefited from significantly lower impairments, reflecting a combined credit loss ratio (clr) of 1,39% (2013: 1,80%), which is within the risk appetite target ranges of each cluster.

neDBank BusIness BankIngHeadline earnings

NEDBANK BUSINESS BANKING

20142013201220112010

1 094

929

944

866

825

Headline earnings Return on equity

20142013201220112010

20,1

19,4

21,5

21,3

26,4

Return on equity

NEDBANK BUSINESS BANKING


29b


total Nedbank Retail and business banking

total Nedbank business banking total Nedbank Retail Home loans MFC Personal loans Card

transactional and investment Other

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Headline earnings (rm) 4 031 3 468 1 094 929 2 937 2 539 646 385 1 042 1 065 624 432 863 859 (86) (94) (152) (108)return on equity (%) 14,6 13,0 20,1 19,4 13,3 11,6 12,6 7,7 14,3 14,5 17,9 11,2 28,2 30,9 (3,0) (3,5) 12return on assets (%) 1,24 1,16 1,01 0,96 1,42 1,27 0,64 0,38 1,53 1,75 3,36 1,97 5,43 6,30 (4,75) (4,91)credit loss ratio (%) 1,39 1,80 0,42 0,65 1,70 2,16 0,09 0,33 1,21 1,17 10,02 12,23 4,84 4,86 3,16 4,18non-interest revenue to total expenses (%) 65,5 70,0 50,5 55,4 69,5 73,9 22,3 20,1 49,4 45,7 69,0 95,1 127,8 131,2 58,8 62,2 16,4 (21,9)efficiency ratio (%) 62,4 60,0 65,1 64,5 61,8 58,9 51,3 53,6 32,9 32,6 31,2 26,6 57,9 56,5 100,5 100,4 (14,5) 49,1Interest margin (%) 4,97 4,95 3,24 3,24 5,91 5,81 1,81 1,67 4,50 4,82 17,03 15,10 7,96 8,21 2,38 2,24Impairments charge on loans and advances (rm) 3 771 4 765 271 410 3 500 4 355 97 345 853 729 1 879 2 666 604 530 67 85total advances (rm) 268 882 258 220 65 819 62 785 203 063 195 435 101 023 100 016 73 488 65 552 14 709 17 575 12 253 10 465 1 554 1 786 36 41average total advances (rm) 261 937 254 523 63 969 61 590 197 968 192 933 100 690 101 625 68 015 60 706 16 239 19 256 11 656 9 979 1 810 1 914 (442) (547)total deposits (rm) 224 103 201 928 105 969 93 997 118 134 107 931 1 44 3 3 1 377 1 095 116 695 106 734 14 99average total deposits (rm) 212 806 191 982 102 265 91 085 110 541 100 897 6 55 86 104 1 590 1 042 108 776 99 664 28 87

allocated capital (rm) 27 565 26 683 5 456 4 780 22 109 21 903 5 129 5 022 7 296 7 322 3 484 3 853 3 066 2 780 2 830 2 702 304 224

lower impairments specifically included: � r139m lower impairments in Business Banking, given the r167m

specific impairment relating to First strut in the 2013 base; and � r855m lower impairments in retail as the improvement seen in

unsecured lending and home loans continued into the second half of 2014.

good progress in gaining quality clients, improving retention and deepening product usage is reflected in 6,9m clients, including 224 000 small-and-medium-enterprise (sme) clients choosing to bank with nedbank.

the sustained investments made in both businesses are expected to bring further improvements in quality-client acquisition and retention over time.

expense growth of 8,4% (2013: 7,5%) reflects the investment in distribution, marketing and innovation but has been contained through active cost management, with r400m in cost savings extracted. nIr growth of 1,5% (2013: 8,8%) is lower than in the previous year due to the impact of no fee increases and selected fee reductions, the slower growth in personal loans as well as continued economic pressures.

consistency of strategic choices, improving the size and quality of our client base, active cost management and steadily improving market perception will contribute to improved returns and sustainable growth of retail and Business Banking, notwithstanding the challenging economic and regulatory environment.

Nedbank Business BankingBusiness Banking is regarded by clients and other market stakeholders as a significant competitor and has maintained its strong position in challenging market conditions. the business continues to strive towards being the leader in business banking by having more clients do more business with us.

Business Banking’s headline earnings increased by 17,8% to r1 094m (2013: r929m) at an roe of 20,1% (2013: 19,4%), generating economic profit of r358m (2013: r308m). this growth was assisted by the r167m First strut impairment that occurred in 2013.

notwithstanding low levels of business confidence causing many business owners to delay key investment decisions and manage their cashflows more carefully, it was pleasing to see preprovisioning profit increase by 5,8% to r1,8bn (2013: r1,7bn).

net interest income (nII) continued to grow strongly at 12,5% (2013: 6,3%), driven by sound growth of 12,3% in client deposits and 3,9% growth in average banking advances on the back of continued

strong asset payouts. this was further aided by r175m of higher endowment earnings, given the increase in the prime interest rate of 75 basis points in 2014. Business Banking is a strong generator of funding, with r102,3bn in total deposits and r48,2bn net surplus funds placed with the group (2013: r38,7bn).

the overall margin was maintained at 3,24%, as the 17 basis point benefit of higher endowment earnings was largely offset by a change in product mix as liabilities, at a lower margin, grew faster than assets.

nIr decreased by 1,1% (2013: 9,6% increase) owing to no transactional-fee increases in 2014, as well as selective fee reductions, which negatively impacted nIr by an estimated r120m in the current year. the 2014 pricing strategy was necessary to ensure alignment with market practices by implementing a simpler flat-fee pricing structure and positioning the business competitively for growth. the opportunity to communicate these beneficial pricing changes to clients was leveraged through face-to-face engagements to explore additional product needs and deepen the client relationship, which we expect will result in improved client retention and increased product cross-sell over time.

the clr at 0,42% (2013: 0,65%) is below the through-the-cycle target range of 55 to 75 basis points and continues to reflect effective and disciplined management risk practices.

total expenses have increased by 8,6% as cost efficiencies and headcount savings from judicious expense management and greater automation are reinvested in system enhancements, product innovation, the development of a self-service capability and compliance with new regulations.

key innovations in 2014 focused on adding value to clients while improving security. these included:

■ the new Plug and transact™ token: a usB token platform that provides business clients with tighter online transaction security. It provides a digital ‘safe zone’ through a usB key plugged into a Pc or mac, which allows for secure transactions.

■ notifications: a dynamic notification service that informs clients of any transactional activity on their account.

■ Payroll lite: a web-based payroll solution that is designed for small businesses with up to 50 employees.

■ aVs-r (real-time account verification service): a new capability that clients can use via electronic banking to confirm that the account details at another bank are in fact correct.

■ corporate saver’s straight-through process, with a fully integrated system that enables clients to make deposits directly into their accounts instead of going via suspense accounts.

30b

neDBank retaIlHeadline earnings

HEADLINE EARNINGS

20142013201220112010

2 93

7

2 53

9

2 55

2

2 09

1

760


Looking forwardalthough economic conditions are expected to remain challenging, there will still be opportunities for growth. the nedbank small Business Index™ is highlighting the pressure felt by small business owners in particular, but equally indicates that there is demand for financial services, including access to credit.

Business Banking's decentralised, accountable business service model and ‘influencer’ strategy to unlock the virtuous circle of business owners, their business and employees are recognised by our clients as compelling differentiators.

the collaboration with nedbank retail to expand in key geographies, optimise costs and footprint through the integrated-channel strategy and move clients proactively to Business Banking as their needs and complexity evolve is proving very valuable in unlocking growth opportunities.

With our committed, values-driven team of people, nedbank Business Banking remains outwardly focused to partner with its clients for growth for a greater sa.

Nedbank RetailHaving completed the repositioning of nedbank retail, the business is now focused on enhancing its returns. this will require continued careful navigation of the external challenges posed by a low-growth, high-volatility economy, increasingly indebted consumers and ongoing regulatory changes.

nedbank retail maintained its strategic focus, which resulted in a 15,7% increase in headline earnings to r2 937m (2013: r2 539m). all of the underlying businesses showed an improved performance and contributed to this growth. retail achieved an improved roe at 13,3% (2013: 11,6%) on the allocated economic capital ratio of 10,7%, while ensuring balance sheet impairments remain at strong levels.

operating income has grown 9,9% to r17 040m (2013: r15 502m), benefiting from the improved impairments charge. Preprovisioning operating profit decreased 4,1% to r7 572m (2013: r7 897m), impacted as expected by strategic choices, which include lower volumes in personal-loan advances, no transactional fee increases and an accelerated rollout of the Branch of the Future format. In addition, there were increasing challenges posed by the low-growth, high-volatility economy, together with highly indebted consumers and ongoing regulatory changes.

FInancIal HIgHlIgHts By lIne oF BusInessfor the year ended 31 December

total Nedbank Retail Relationship banking Consumer banking secured lending Home loans MFC Card Other1

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Headline earnings (rm) 2 937 2 539 323 222 166 1 1 619 1 460 485 308 1 134 1 152 863 859 (34) (3)return on equity (%) 13,3 11,6 15,1 11,4 3,0 0,0 14,6 13,1 12,4 7,8 15,7 15,9 28,2 30,9 (16,6) (2,1)return on assets (%) 1,42 1,27 0,79 0,58 0,17 1,05 0,98 0,59 0,37 1,59 1,75 5,43 6,32 0,03credit loss ratio (%) 1,70 2,16 0,07 0,33 9,70 11,91 0,64 0,72 0,13 0,36 1,25 1,21 4,79 4,92non-interest revenue to total expenses (%) 69,5 73,9 48,7 52,0 61,1 68,7 42,6 39,8 24,3 22,4 57,9 54,3 127,8 131,2 4,3 215,0efficiency ratio (%) 61,8 58,9 80,4 82,7 73,9 67,3 35,6 34,9 52,1 51,4 28,2 27,6 57,9 56,5 376,6 35,9Interest margin (%) 5,91 5,81 3,55 3,41 4,95 5,08 2,92 2,85 1,75 1,62 4,27 4,40 7,96 8,21Impairments charge on loans and advances (rm) 3 500 4 355 18 79 1 921 2 716 957 1 030 105 298 852 732 604 530total assets (rm) 211 904 203 155 24 326 24 022 20 359 22 518 152 824 145 060 80 639 80 809 72 185 64 251 14 378 11 523 17 32average total assets (rm) 206 090 200 064 24 024 23 724 20 909 23 502 147 785 140 983 80 587 81 421 67 198 59 562 13 356 10 952 16 903total advances (rm) 203 063 195 435 24 279 23 940 15 556 18 369 150 824 142 651 79 118 79 186 71 706 63 465 12 395 10 465 9 10average total advances (rm) 197 968 192 933 23 961 23 621 17 182 20 149 145 166 139 183 79 036 80 609 66 130 58 574 11 656 9 979 3 1total deposits (rm) 118 134 107 931 40 576 37 214 76 136 69 576 45 46 1 2 44 44 1 377 1 095average total deposits (rm) 110 541 100 897 37 476 34 342 71 414 65 488 61 25 6 2 55 23 1 590 1 042

allocated capital (rm) 22 109 21 903 2 135 1 952 5 587 5 848 11 110 11 165 3 908 3 933 7 202 7 232 3 066 2 780 211 158

1 Includes Retail central unit, Human Resources, Finance, Projects and Strategy, and Divisional Management

Return on equity

RETURN ON EQUITY

20142013201220112010

13,3

11,6

12,1

10,8

4,6


31b

Key drivers of the 2014 financial performancesnII increased 4,6% to r11 720m (2013: r11 206m). overall margin grew by a net 10 basis points to 5,91%. the increase is made up of 13 basis points from improved pricing, including the compensation for lower insurance-related nIr and 7 basis points in endowment-related benefits resulting from the interest rate increase of 75 basis points in 2014, offset by 7 basis points of mix changes due to the relative shift away from unsecured lending.

average banking advances increased 2,6% to r198,0bn (2013: r192,9bn). new-loan payouts in secured lending, card and overdrafts increased 6,9% to r46,3bn (2013: r43,4bn) while personal-loan payouts decreased by 19,3% to r7,5bn (2013: r9,2bn).

average deposits increased 9,6% to r110,5bn (2013: r100,9bn). the Nedbank MoneyTrader investment offering launched in october 2012 has grown to a cumulative total of r25,8bn (2013: r15,3bn). Despite heightened competitive forces and the impact of Basel III on the pricing of retail deposits, nedbank's share of household deposits at 18,8% (2013: 19,8%) reflects the impact of tougher competitive forces offset by benefits of increased marketing presence and competitive pricing. restatements made by other banks have resulted in changes and incomparability with prior-period market share statistics, but overall market share has fallen slightly. Household deposits remain a key strategic focus area for nedbank and the valuable funding source will be nurtured further through our growth strategy of offering distinctive, innovative client value propositions that enhance product cross-sell.

Defaulted advances continued to decrease to r10,2bn (2013: r11,4bn), which is 4,8% of the advances portfolio, as the sustained excellence in collection efforts, effective client rehabilitations (including restructures and rearrangements) and higher-quality new business continued. the defaults in unsecured lending, which peaked in may 2013, continue to show a downward trend and, overall, balance sheet impairments have been maintained at 3,61% of total advances (2013: 4,05% and June 2014: 4,04%). specific coverage decreased to 49,4% (2013: 49,9% and June 2014: 50,1%). Defaulted advances, specific provisions as well as coverage ratios have been impacted by the decision to write off r400m of fully provided advances in mFc.

current coverage on retail's performing advances has been maintained at 0,74% (2013: 0,74%). this reflects the effects associated with high industry rates of growth in unsecured lending in preceding years, together

with increasing consumer indebtedness and expected outcomes from recent strike action on the performing portfolio.

the clr of 1,70% (2013: 2,16%) has improved significantly due to lower impairments in Home loans and Personal loans and closed the year below the through-the-cycle target range of 190 to 260 basis points. as a result of the active credit management actions taken, including the strong focus on collections, the clr in Personal loans declined to 10,0% from 12,2% in 2013 and in Home loans to 0,13% from 0,33% in 2013.

the 2,0% increase in nIr to r8 820m (2013: r8 651m) is a function of solid growth from the higher volume and quality of transactional clients across all segments and card transactional revenue (together contributing an additional r601m), offset by a reduction in nIr from personal-loan volumes of r269m. the reduction in nIr from the lower pricing for credit life of r95m was compensated for in the higher interest margin achieved on unsecured lending. the strategic decision to leave pricing unchanged for 2014 as well as to reduce selected fees has improved client retention and gains, and ensured that nedbank is competitively priced in the retail market. the opportunity cost of no fee increases and selected reductions is r235m. total growth amounts to 9,2%, excluding personal loans, fee reductions and the pricing impact.

total clients grew 7,2% from 6,4m in December 2013 to 6,9m in 2014, notwithstanding a reduction of personal-loan accounts in line with risk strategies adopted. excluding personal-loan standalone clients, the number of clients grew 8,5%, with nIr growing by 5,8%.

expenses increased by 8,4% to r12 690m (2013: r11 705m), which includes r235m from the ongoing investment in distribution (2013: r151m) and an additional r198m from increased selling-related costs as well as r52m in additional credit, collections and risk-related costs. the distribution growth includes an additional 304 net new self-service devices, which includes the rollout of 298 ‘Intelligent Depositor’ devices. We now have 456 of these devices, which are processing on average 354 000 deposit transactions a month. altogether 20 new branches and inretailer outlets were built during 2014, offset by 20 closures as we aim to eliminate duplication. a total of 65 branches and 54 inretailer outlets were reformatted in line with the Branch of the Future design principles, bringing the total new-format branches to 171. these formats include the queuing system, internet stations and expanded services on video banking. this programme has resulted in a reduction of 133 staffmembers in branch networks (a net optimisation from distribution and other initiatives of 272 and growth of 139 due to investment in new distribution) and a 10 418 m2 decrease of

FInancIal HIgHlIgHts By lIne oF BusInessfor the year ended 31 December

total Nedbank Retail Relationship banking Consumer banking secured lending Home loans MFC Card Other1

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Headline earnings (rm) 2 937 2 539 323 222 166 1 1 619 1 460 485 308 1 134 1 152 863 859 (34) (3)return on equity (%) 13,3 11,6 15,1 11,4 3,0 0,0 14,6 13,1 12,4 7,8 15,7 15,9 28,2 30,9 (16,6) (2,1)return on assets (%) 1,42 1,27 0,79 0,58 0,17 1,05 0,98 0,59 0,37 1,59 1,75 5,43 6,32 0,03credit loss ratio (%) 1,70 2,16 0,07 0,33 9,70 11,91 0,64 0,72 0,13 0,36 1,25 1,21 4,79 4,92non-interest revenue to total expenses (%) 69,5 73,9 48,7 52,0 61,1 68,7 42,6 39,8 24,3 22,4 57,9 54,3 127,8 131,2 4,3 215,0efficiency ratio (%) 61,8 58,9 80,4 82,7 73,9 67,3 35,6 34,9 52,1 51,4 28,2 27,6 57,9 56,5 376,6 35,9Interest margin (%) 5,91 5,81 3,55 3,41 4,95 5,08 2,92 2,85 1,75 1,62 4,27 4,40 7,96 8,21Impairments charge on loans and advances (rm) 3 500 4 355 18 79 1 921 2 716 957 1 030 105 298 852 732 604 530total assets (rm) 211 904 203 155 24 326 24 022 20 359 22 518 152 824 145 060 80 639 80 809 72 185 64 251 14 378 11 523 17 32average total assets (rm) 206 090 200 064 24 024 23 724 20 909 23 502 147 785 140 983 80 587 81 421 67 198 59 562 13 356 10 952 16 903total advances (rm) 203 063 195 435 24 279 23 940 15 556 18 369 150 824 142 651 79 118 79 186 71 706 63 465 12 395 10 465 9 10average total advances (rm) 197 968 192 933 23 961 23 621 17 182 20 149 145 166 139 183 79 036 80 609 66 130 58 574 11 656 9 979 3 1total deposits (rm) 118 134 107 931 40 576 37 214 76 136 69 576 45 46 1 2 44 44 1 377 1 095average total deposits (rm) 110 541 100 897 37 476 34 342 71 414 65 488 61 25 6 2 55 23 1 590 1 042

allocated capital (rm) 22 109 21 903 2 135 1 952 5 587 5 848 11 110 11 165 3 908 3 933 7 202 7 232 3 066 2 780 211 158

1 Includes Retail central unit, Human Resources, Finance, Projects and Strategy, and Divisional Management

32b


space occupied. the new-image branches have shown a 12% lift in sales volumes. at the same time r395m in operating efficiencies were unlocked to offset the cost of these investments. organic cost growth, excluding the impact of the above, increased by 7,6%. Headcount (incl temp) was tightly managed and increased by only 1,48% to 18 765 (2013: 18 491), which included additional staff to support the growth in distribution footprint and the conversion of staff from temporary to permanent positions.

Looking forwardnedbank retail has continued to strengthen the foundations from which to grow. the continuation of the difficult macroeconomic environment, compounded by the prospect of ongoing labour unrest and slower gross domestic product growth, will result in a more challenging operating environment. regulatory changes on the horizon (Basel III and revised interchange rates) will also negatively impact the level of earnings growth.

the nIr impact of the revised interchange rates, effective 17 march 2015, is estimated at r270m for nedbank retail assuming 2014 transaction volumes. In addition, the rate of improvement seen in impairments in 2014 is unlikely to be sustained, particularly as we enter into an upward rate cycle. retail will continue with the elimination of cost duplications with Business Banking as well as other cost-efficiency strategies.

nedbank retail is committed to delivering a great client experience with friendly, efficient service and competitively priced products, and providing superior value banking to all. over the next three years a further r2,1bn will be invested to expose 75% of our clients to the enhanced branch format. continued improvements in quality-client acquisition, improved attrition and deeper product penetration are expected to result in growth in the transactional banking franchise over time.

nedbank retail remains focused on delivering its client-centred strategy and to enhance returns.

Nedbank Retail 2014 segmental reviewsecured lending's headline earnings increased r158m or 10,8% to r1 619m at an roe of 14,6%.

mFc delivered headline earnings of r1 134m at an roe of 15,7%. the book grew 12,4% to r73,7bn, with market share increasing to 28,8% (2013: 27,7%). the business operating model and service excellence continue to be strong differentiators, continuing to set benchmark credit approval turnaround times. although the results reflect a reduced margin of 4,27% (2013: 4,40%), driven by rolloff of the more favourably priced backbook, the business remains well positioned to take advantage of its efficiency ratio of below 30% as well as its strong share of the used-car finance market. the clr and non-performing loan ratio deteriorated marginally to 1,25% and 2,5% respectively, performing well within the target range. specific coverage on defaulted loans dropped to 53,4% (2013: 67,1%), driven mainly by the decision to write off r378m of fully provided advances. In addition, mFc proactively rearranged more than 24 000 accounts, keeping these clients using their cars rather than taking legal or repossession action. to improve efficiencies further five premerger collections systems were replaced by a single improved and rationalised collections platform.

Home loans delivered headline earnings of r485m, increasing roe to 12,4%, up by 58%. this result has been driven by an improvement in the clr to 0,13% (2013: 0,36%) and improved pricing for risk. new business is now priced on average at approximately 60 basis points above prime, compared with well below prime before 2009. new business granted increased 25%, 10% of which is originated through online applications. this is now a key differentiator of the value proposition, offering clients convenience and bond approval within hours.

retail's home loan defaulted portfolio continued to improve to 4,8% of home loan advances (2013: 5,6%) and is now at r3,9bn (2013: r4,5bn). the balance-sheet-performing coverage ratio decreased to 0,89%

(2013: 0,96%) and the specific-coverage ratio dropped to 26,4% (2013: 29,1%) as the ageing on the defaulted book improved. the increase in portfolio provisions included an additional r55m provided in H1 2014 for clients with exposures to unsecured lending who could have a higher propensity to default in the future, taking the total of this provision to r210m. the post-2008 frontbook now generates an roe of 19%, compared with 6% from the pre-2008 backbook, which continues to impact negatively on overall performance. nedbank remains committed to helping clients facing financial hardship and provides a website that aims to educate clients about their options should they be falling behind on their bond repayments. this website (Home loans Payment solution) has been viewed by over 46 000 people. In addition, over 22 000 families have been able to retain their homes as a result of loan restructures, which offer an effective rehabilitation process, with the redefault rate on these loans being well under 20%.

Cardnedbank card and Payments grew headline earnings by 0,5% to r863m (2013: r859m) at an roe of 28,2% (2013: 30,9%). the worsening consumer credit dynamics saw higher card impairments impacting headline earnings growth. Despite this, the clr at 4,8% (2013: 4,9%) is well within risk appetite parameters. nIr growth of 8,6% was underpinned by 20% growth in acquiring turnover, moderated by lower cardholder transacting volumes and fees earned. the greenbacks loyalty and rewards membership base grew by 29%, largely driven by the increase in savvy account clients and existing clients joining the programme. the innovative sHoP card was launched, enabling greenbacks members to access the value of their rewards at any atm, make point-of-sale purchases at merchants both domestically and abroad, and use their rewards for online shopping.

crossdivisional collaboration to acquire and retain more clients, optimising the efficiency of the core business and the full commercialisation of new payment solutions will ensure continued growth, notwithstanding the impact of reduced interchange fees earned from march 2015.

advances in technology, notably mobile, and changing client payment needs will continue to provide opportunities for innovation. launching new payment solutions will serve to entrench our card issuing and acquiring capabilities and ensure we remain relevant and responsive to client needs. an example of this is market edgetm, a first in market web application that provides nedbank merchants with rich customer data from their Pos transactions, assisting them to leverage the insights gained to make better business decisions.

Consumer Bankingconsumer Banking headline earnings improved to r166m (2013: r1m) at an roe of 3,0% (2013: 0,02%). this was mainly because a significant decrease in impairments, which more than offset the lower personal-loan volumes. Investments in distribution and marketing were also maintained.

revenues of r8,6bn were generated (2013: r8,7bn) in delivering the ‘I know about you’ client experience, against which r1,9bn (2013: r2,7bn) was charged for impairments and a further r6,3bn for operating costs (2013: r5,8bn).

Digitally enabled clients are up 48% year on year and engaged users on all nedbank social platforms are up 38%, with nedbank leading the number of 'likes' on google+ relative to peers.

management actions contributed to Personal loans increasing headline earnings 44,2% to r624m (2013: r432m) at an roe of 17,9% (2013: 11,2%). Personal loans, including the economics reflected in the Wealth cluster, has increased headline earnings 26,2% to r874m and generated an roe of 24,0% (2013: 17,3%) on an allocated economic capital ratio of 19,4%.

the growth of new personal-loan advances remains below current industry levels. However, the improved quality of risk and higher gross operating income margins compensate for this at headline earnings level.


33b

Number of Business Banking clientsNEDBANK BUSINESS BANKING OPERATIONAL STATISTICS

Number of clients Number of electronic banking profiles

Number of locations

21 8

42

20 6

82 24 33

0

24 77

0

Dec 10 Dec 11 Dec 12 Dec 13 Dec 14

25 12

4

18 9

50

18 18

3

19 51

0

20 4

27


21 18

0

63 64 67 67


70

Number of Retail clients Number of ATMsNEDBANK RETAIL OPERATIONAL STATISTICS

CENTSNumber of clients Number of ATMs

4 83

2 306

5 256

651

5 893

870

1

6 42

2 504


6 88

7 794

2 183 2 5

72

3 048 3 3

82


3 585

NEDBANK RETAIL OPERATIONAL STATISTICS

CENTSNumber of clients Number of ATMs

4 83

2 306

5 256

651

5 893

870

1

6 42

2 504


6 88

7 794

2 183 2 5

72

3 048 3 3

82


3 585

1 Adjusted for MFC client migration

retaIl BankIng: key BusIness statIstIcsRetail banking 2014 2013

Home loansnumber of applications received thousands 106 100Value of loan pay-outs rbn 13,0 11,4average loan-to-value (ltV) of new business registered % 90 88average balance-to-original-value (BtV) of portfolio % 77 78Proportion of new business written through own channels % 73 72Proportion of book written since 2009 % 51 43owned-properties book rm 205 242Vehicle finance (MFC)number of applications received thousands 1 401 1 371Value of loan pay-outs rbn 30,8 29,8sales used vehicles % 66,8 64,7Personal loansnumber of applications received thousands 1 098 1 430Disbursal rate % 19,1 18,9Value of loan pay-outs 7,4 9,2average loan size thousands 35 441 34 092Number of clientsHome loans thousands 326 334mFc thousands 546 536Personal loans thousands 555 658card issuing thousands 1 034 988Investment products thousands 1 193 1 074transactional products thousands 5 358 4 880distributionnumber of branches 570 573number of banking outlets 193 190number of Personal loans kiosks 279 287number of atms (including 15 cIma devices) 3 585 3 382number of atms with cash-accepting capabilities1 456 158change in digitally enabled clients % 48 40Pos devices thousands 57 521 Cash-accepting devices (456) included in total number of ATMs (3 585).

BusIness BankIng: key BusIness statIstIcsbusiness banking 2014 2013

Number of clients at period endnumber of clients groups 25 124 24 770distributionnumber of branches 70 71

Digitally enabled clients 21 180 20 427

34b


overall margins for the personal-loans book increased by 193 basis points to 17,0% (2013: 15,1%).

as planned, the personal-loans book declined by r3 045m, or 15,1%, from 2013, compared with the overall industry personal-loan market (excluding nedbank), which grew by r7 822bn, or 4,9%, in 2014. the negative growth rate is, however, slowing and the book is expected to stabilise in 2015. market dynamics are shifting towards higher-value consolidations for middle-market clients, although at higher interest rates than pre-2014 levels. client retention has remained stable over the period; however, the elevated levels of consumer indebtedness have resulted in a cautious approach to acquisition, given client affordability constraints.

Personal loans continues to excel in the selective origination direct marketing campaigns, winning three gold and two silver awards at the annual assegai awards. In addition, the Brighter tomorrow campaign won the prestigious nkosi award for the best campaign across all categories.

the Personal loans clr decreased to 10,0% in 2014 (2013: 12,2%). Defaults peaked in may 2013 and are now 11,5% lower than in December 2013. specific actions taken have ensured that the impairments charge has remained at or below the June 2013 level, with management continuing to be vigilant as the risks identified early in 2012 emerge across the unsecured-lending industry.

given current consumer health levels as well as ongoing industry concerns, credit risk optimisation and collections performance remain a priority. the overall book quality continues to improve, with less than r160m of the existing book outside our current risk appetite range. a further r709m is underpriced relative to new business; however, this portfolio is continuing to decline and both portfolios are performing in line with expectations.

exceptional performance from a credit risk management and collections perspective has resulted in vintages after 2012 performing at levels similar to those in the first half of 2011, but at higher margins and roes. Postwriteoff recoveries improved by 24,2% year on year from r276m to

r343m, highlighting improved collections performance, as well as a conservative writeoff policy and provisioning. the non-performing loan coverage has increased to its highest-ever level of 65,9% (2013: 62,1%).

Retail Relationship Bankingretail relationship Banking (rrB) serves two distinct client segments: small business with a turnover of less than r10m and professionals (defined as people in senior positions or with high earnings growth trajectories, including young graduates regardless of their field of study or work). these two segments have a common need for relationship capabilities and an 'I know you' banking experience.

rrB achieved a 45,5% increase in headline earnings to r323m (2013: r222m) at a significantly improved roe of 15,1% (2013: 11,4%) on r2,1bn of allocated capital. a strong focus on collections, granting of quality loans with emphasis on primary-banked clients and model refinements have reduced impairments by r62m, with the clr at 0,07% (2013: 0,33%), which is well below the through-the-cycle target range of 1,0% to 1,5%. this clr is, however, not a good indicator of the inherent risk profile of the book, nor the 'open for business' mindset prevalent in the business. the latter is evidenced by increased payouts, growth in client numbers and ongoing improvements to the credit policy. moderate expense growth was maintained following the implementation of large-scale organisational changes in 2013 to unlock efficiencies and ongoing diligence in managing down organic cost and headcount.

the business continues to gain momentum, even though the small-business segment remains under pressure in the current economic environment and competition in the professional/upper-middle segment remains fierce. the redefined proposition for professionals, coupled with a proactive internal migration strategy, provides significant opportunity for future growth. nedbank's strong positioning in the small-business segment built over several years is being leveraged to enable small-business growth not only for nedbank but also for a stronger and more sustainable sa.

Favourable unfavourable

■ Quality origination across all asset classes at appropriate risk-based pricing.

■ significantly lower impairments, particularly in Personal loans, Home loans and relationship Banking. clr below our through-the-cycle range.

■ client gains driving nIr growth. ■ cost-efficiency gains through consolidation of roles, removal of

duplication and increased technological enablement. ■ consistent investment in distribution and client-centered innovation.

■ muted credit growth as consumers remain highly indebted. ■ slowdown in unsecured lending market. ■ keeping fees at 2013 levels or better and slowdown in personal-loans

volumes reducing nIr growth. ■ regulatory and selling-related costs driving expense growth.


35b

Nedbank Retail – advances and impairmentsfor the year ended 31 December

daily gross average advances

RmCurrent

%impaired

%defaulted

%% of

total advances

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Home loans 102 638 103 970 92,6 91,9 2,9 2,8 4,5 5,3 48,9 50,5mFc1 70 233 62 541 93,2 93,2 4,2 3,8 2,6 3,0 35,8 33,2Personal loans 18 752 21 796 79,1 78,7 6,3 7,3 14,6 14,0 8,1 9,9card 12 484 10 901 89,8 89,7 3,4 3,0 6,8 7,3 6,3 5,5

overdrafts and other loans 2 099 2 013 86,4 85,7 1,1 1,7 12,5 12,6 0,9 0,9

total 206 206 201 221 91,5 90,9 3,7 3,6 4,8 5,6 100,0 100,0

Balance sheet impairment as a % of booktotal impairments

RmCurrent

%impaired

%defaulted

%%

of total

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Home loans 2 017 2 410 0,49 0,53 8,51 10,29 27,95 29,15 1,96 2,34mFc1 2 021 2 188 0,80 0,79 13,16 12,88 53,59 66,97 2,68 3,24Personal loans 2 377 2 547 2,33 1,81 38,58 34,56 65,93 62,09 13,91 12,65card 962 884 0,55 0,63 12,28 14,11 94,31 93,75 7,29 7,84

overdrafts and other loans 223 226 0,41 0,44 41,14 43,51 92,01 90,47 12,30 12,49

total 7 600 8 255 0,74 0,74 14,88 16,34 49,44 49,91 3,61 4,05

Balance sheettotal advances

RmPerforming

Rmdefaulted

RmPortfolio impairments

Rmspecific impairments

Rm

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Home loans 103 040 102 871 98 431 97 370 4 609 5 501 728 806 1 289 1 604mFc1 75 509 67 599 73 560 65 577 1 949 2 022 977 833 1 044 1 355Personal loans 17 086 20 129 14 584 17 302 2 502 2 827 728 791 1 649 1 756card 13 215 11 281 12 323 10 457 892 824 120 112 842 772

overdrafts and other loans 1 813 1 810 1 586 1 582 227 228 15 20 208 206

total 210 663 203 690 200 484 192 288 10 179 11 402 2 568 2 562 5 032 5 693

Income statementincome statement impairment charge

Rm

Portfolio impairments

Rm

specific impairments

Rm

Postwriteoff recoveries

RmCredit loss ratio

%

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Home loans 97 345 (77) 150 255 279 (81) (84) 0,09 0,33mFc1 853 729 143 (8) 903 925 (193) (188) 1,21 1,17Personal loans 1 879 2 667 (64) 162 2 286 2 780 (343) (275) 10,02 12,23card 604 530 9 16 783 696 (188) (182) 4,84 4,86

overdrafts and other loans 67 84 (5) (8) 121 142 (49) (50) 3,16 4,18

total 3 500 4 355 6 312 4 348 4 822 (854) (779) 1,70 2,161 Restated defaulted restructured accounts and related provisions which were incorrectly classified in Dec 2013 as performing and have now been correctly classified as defaulted to better reflect the underlying nature. There was a prospective change in the writeoff policy of the MFC portfolio during the second half of 2014. Although the 2013 coverage ratios are not required to be restated should the change have applied retrospectively, the 2013 coverage ratio would have been 57,14% for defaulted advances and 2,57% for total advances.

36b


NedbaNk WealtH


2014 2013

Headline earnings (rm) 1 042 900return on equity (%) 36,8 36,2return on assets (%) 1,91 1,95credit loss ratio (%) 0,17 0,28non-interest revenue to total expenses (%) 136,9 138,9efficiency ratio (%) 61,7 61,4Interest margin (%) 1,94 1,93Impairments charge on loans and advances (rm) 41 59assets under management (rm) 212 013 190 341life assurance embedded value (rm) 2 393 2 137life assurance value of new business (rm) 257 352total assets (rm) 57 609 50 911average total assets (rm) 54 640 46 129total advances (rm) 24 819 22 082average total advances (rm) 23 685 21 029total deposits (rm) 26 122 21 704average total deposits (rm) 23 719 18 612allocated capital (rm) 2 830 2 487

Looking forwardover the past five years, nedbank Wealth has consistently delivered strong growth with high returns on equity. this performance has been achieved by focusing on internal alignment, collaboration and simplification to improve our client experience and propositions.

the outlook for 2015 remains mixed, given the level of markets, volatility and the rebasing of our insurance business.

In Insurance we will focus on simple bancassurance and broaden our life investments offering, taking advantage of the bank’s distribution and related opportunities to collaborate within the wider old mutual group.

asset and Wealth management are well positioned in their respective markets, both in terms of the unique Best of Breedtm offering and integrated international value propositions.

nedbank Wealth’s headline earnings grew by 15,8% to r1 042m (2013: r900m). these results are attributed to record earnings growth in Wealth management as well as continued growth momentum in asset management, partially offset by relatively slower growth in Insurance.

the net interest margin was maintained at a level of 1,94% while our credit loss ratio improved to 0,17% (2013: 0,28%), slightly below our through-the-cycle target range of 20 to 40 basis points.

the ratio of non-interest revenue (nIr) to expenses deteriorated marginally to 136,9% (2013: 138,9%) as a result of lower nIr growth in asset management and overall increase in expenses driven by investment in new systems, products, intellectual property (IP) and capacity. Despite this, the efficiency ratio was maintained at 61,7% (2013: 61,4%) primarily due to strong net-interest-income (nII) growth of 18,3%.

Wealth management delivered a noteworthy uplift in earnings both locally and internationally. the success in the repositioning and profiling of our integrated international high-net-worth proposition is evidenced by the strong performance of our banking operations, with overall advances up 13,3% and liabilities up 27,8%. the stockbroking and financial planning businesses continue their growth momentum off a high base set in prior years.

asset management generated net inflows of r8,5bn against a backdrop of volatile markets and the uncertainty created from the demise of african Investments Bank limited (abil). overall assets under management increased 11,4% to r212bn (2013: r190bn). Internationally, the Best of Breedtm model is proving to be successful, with strong net inflows into the global equity and Flexible Funds. locally we attracted excellent flows in the unit trust and multi-asset passive industries. For the sixth consecutive year nedgroup Investments was ranked third in the annual raging Bull awards. this is an outstanding achievement and testimony to our commitment to long-term performance and stewardship.

Insurance earnings growth slowed due to lower retail volumes as well as higher weather-related claims experienced in the first half of 2014. the drop in the retail volumes resulted in the 27% decline in the value of new business. Despite this, embedded value grew 12,0% to r2 393m (2013: r2 138m) as a result of funds reserved for acquisition into the nedbank Insurance green Property Fund. We continue to invest in the broadening of our insurance offering, evidenced by strong growth in funeral and niche short-term products. the transformation of our insurance business is well on track with the move to a single insurance system and good progress being made in the mobile, digital and direct space.

Assets under managementASSETS UNDER MANAGEMENT

Rest of the world

SA

10 15

5

16 5

04

31 12

9

102

076

133

991

180

884

24 0

6216

6 27

9


6 19

196

379


37b


■ scale benefits in asset management. ■ excellent investment performance. ■ strong client and banking growth in Wealth management. ■ growth in non-traditional insurance products. ■ Benign weather-related claims in the second half of 2014.

■ Volatile and lower market growth. ■ abil effect on flows in money market. ■ Interest rates lower for longer. ■ rebasing of retail volumes in traditional products. ■ High weather-related claims in the first half of 2014.

Headline earnings

HEADLINE EARNINGS

20142013201220112010

1 042

900

716

654

592

Return on equity

RETURN ON EQUITY

20142013201220112010

36,8

36,2

29,6

27,7

41,0

Note: 2010 not restated for enhancements to economic captial allocation methodologies

assets unDer managementat 31 December

2014Rm

2013Rm

Fair value of funds under management – by typeunit trusts 154 869 135 327third parties 1 846 1 760Private clients 55 298 53 254

212 013 190 341Fair value of funds under management – by geographysa 180 884 166 279rest of the world 31 129 24 062

212 013 190 341

unit trusts

Rm

third parties

Rm

Private clients

Rmtotal

RmReconciliation of movement in funds under management – by typeopening balance at 31 December 2013 135 327 1 760 53 254 190 341Inflows 209 746 16 10 054 219 816outflows (200 072) (153) (11 106) (211 331)mark-to-market value adjustment 7 631 155 2 953 10 739Foreign currency translation differences 2 237 68 143 2 448Closing balance – 31 december 2014 154 869 1 846 55 298 212 013

saRm

Rest of the world

Rmtotal

Rm

Reconciliation of movement in funds under management – by geography

opening balance at 31 December 2013 166 279 24 062 190 341

Inflows 213 948 5 868 219 816

outflows (208 727) (2 604) (211 331)

mark-to-market value adjustment 9 384 1 355 10 739Foreign currency translation differences 2 448 2 448

Closing balance – 31 december 2014 180 884 31 129 212 013

38b


FInancIal HIgHlIgHtstotal Rest of

africa divisionRest of africa subsidiaries

Rest of africa investments

2014 2013 2014 2013 2014 2013

Headline earnings (rm) 357 173 224 165 133 8 return on equity (%) 10,1 8,7 10,3 13,5 9,8 1,1return on assets (%) 1,58 0,90 1,31 1,04 2,38 0,25credit loss ratio (%) 0,23 0,37 0,39 0,39 (0,63) 0,28non-interest revenue to total expenses (%) 61,2 59,9 60,5 62,3 75,5 15,7efficiency ratio 69,2 76,3 73,2 76,4 32,2 74,8Impairments charge on loans and advances (rm) 35 50 49 43 (14) 7 total assets (rm) 27 428 20 117 19 523 16 299 7 905 3 818 average total assets (rm) 22 684 19 206 17 084 15 920 5 600 3 286 total advances (rm) 14 073 14 700 13 775 11 748 298 2 952 average total advances (rm) 14 821 13 520 12 575 10 886 2 246 2 634 total deposits (rm) 17 058 14 406 17 058 14 406 average total deposits (rm) 16 830 13 801 16 830 13 801 allocated capital (rm) 3 549 1 998 2 184 1 225 1 365 773

Rest OF aFRiCa diVisiONthe year 2014 has been a transformational year for the nedbank rest of africa Division, with considerable efforts to build our Pan-african banking network for the benefit of our clients and shareholders showing material progress.

our strategy in building the Pan-african network is to have our own banking operating entities in 10 countries in the medium term in the southern african Development community (saDc) and east africa (we are currently represented in six countries) and to provide access to a banking network in West and central africa through our strategic investment and alliance in the Pan-african banking group, ecobank, which operates in 36 countries.

nedbank concluded its investments in ecobank transnational Incorporated (etI) and Banco Único, increasing our presence across the african continent.

In saDc and east africa we:

■ grew and strengthened our existing businesses in the five countries in which we operate, with the intent of ensuring that we provide a single operating banking model; and

■ increased our presence in six countries through an initial stake of 36,45% in Banco Único, mozambique; great collaboration efforts are currently seen between the two organisations to increase the number of companies doing business in mozambique.

In West and central africa we have deepened our alliance with etI with a shareholding of approximately 20% in 2014. this investment will enable nedbank and etI to provide our clients access to the largest banking network on the african continent across 39 african countries. great strides are being made in executing the alliance, with all the clusters participating directly with their counterparts in etI to leverage the benefits of working closely together. the strategic alliance agreement was broadened to include a technical support component in terms of which balance sheet management, risk and It expertise is shared.

Financial highlightsthe nedbank rest of africa Division delivered growth in headline earnings of 106% to r357m (2013: r173m) and generated a return on equity (roe) of 10,1% (2013: 8,7%) with an allocated economic capital ratio of 15,0%. strong earnings growth of 35,9% was achieved in the five existing saDc banking subsidiaries, with performance including associate income from its investments in etI and Banco Único for the first time.

net interest income (nII) was 12,1% higher at r899m, including the grossed- up cost of financing the investments in associates. the banking subsidiaries' growth in nII was 24,3%, driven by advances growth of 17,3% and higher capital allocations.

non-interest revenue (nIr) at r768m (2013: r675m) was 13,8% higher as a result 8,8% growth in the banking subsidiaries and net fair-value gains arising from investments.

the credit loss ratio improved to 0,23% (2013: 0,37%) due to the release of the portfolio provision carried against the loan to etI.

expenses increased by 11,5% to r1 256m (2013: r1 126m), with the efficiency ratio strengthening to 69,2% (2013: 76,3%) mainly due to the inclusion of associate income net of funding costs for the first time.

associate income of r148,9m (2013: nil) was generated from the investments in associates, with Banco Único turning profitable during the year as anticipated. associate income for etI was estimated by nedbank on a prudent basis, effective from the fourth quarter, as etI reports later than nedbank. In future, earnings from etI will be reported a quarter in arrears.

Looking forwardthe prospects for the rest of africa Division are favourable. We will continue to grow our existing businesses by:

■ increasing our market share and revenues in our rest of africa banking subsidiaries;

■ generating further synergies and collaborative opportunities with etI to create additional value for our clients and enhance our one-bank experience;

■ continuing to expand our footprint in saDc and east africa by exploring opportunities in the growing african economies in this region; and

■ continuing to leverage off and collaborate with the greater nedbank group to build africa's most admired bank.


39b

Headline earnings

HEADLINE EARNINGS

201420132012

357

173

176

125

2011

ATMs

ATMs

201420132012

126

117

9891

2011

Return on equity

RETURN ON EQUITY

2014201320122011

10,1

8,7

9,5

11,5

Branches

BRANCHES

201420132012

6117

564950

2011

Banco Único


■ Investment in etI contributing to growth in headline earnings. ■ Deepening and strengthening our strategic and technical alliance to

enhance our value proposition for our clients further. ■ consistent investment in distribution and client-centered innovation. ■ Investing in our people and strengthening our leadership. ■ Improved performance from our africa subsidiaries, with robust

growth in advances and low-defaulted advances. ■ enhancing our client value proposition and introducing new products

in our wholesale banking franchise such as cash online and PocketPos™.

■ Higher exposure to risks arising from political, social and economic factors impacting stability, which risks are higher than in more developed markets.

■ muted primary client acquisition. ■ slow nIr growth. ■ Increased regulatory requirements driving costs of compliance. ■ market value of etI less than carrying value at 31 December 2014.

40b

Notes to the coNsolidated statemeNt of compreheNsive iNcomefor the year ended 31 december

1 averaGe BaNKiNG statemeNt of fiNaNcial positioN aNd related iNterest

2014 2013

Averagebalance

Margin statement interest

Averagebalance

Margin statement interest

Rm Assets Received % Assets Received %

average prime rate 9,07 8,50loans and advanceshome loans (including pips) 136 669 10 764 7,88 136 603 9 818 7,19commercial mortgages 113 525 9 811 8,64 98 223 8 117 8,26finance lease and instalment debtors 88 119 8 942 10,15 79 266 7 753 9,78credit card balances 12 715 1 712 13,47 11 102 1 473 13,28overdrafts 15 541 1 432 9,21 14 439 1 263 8,75term loans and other1 185 310 9 572 5,17 163 494 7 757 4,74personal loans 19 838 4 318 21,77 22 660 4 662 20,57impairment of loans and advances (11 536) (11 635)Government and public sector securities 41 692 3 581 8,59 41 229 3 571 8,66

short-term funds and trading securities 50 321 2 487 4,95 39 334 1 673 4,26

Interest-earning banking assets 652 194 52 619 8,07 594 715 46 087 7,75Net interdivisional assets – trading book (34 551) (21 356)revaluation of fvtpl-designated assets 761 1 454derivative financial instruments 129 185insurance assets 15 968 13 835cash and bank notes 4 095 3 552other assets 10 739 7 552associates and investments 7 117 4 126property and equipment 7 143 6 615intangible assets 8 301 7 993

mandatory reserve deposit with central banks 13 555 13 124

Total assets 685 451 52 619 7,68 631 795 46 087 7,29

Liabilities Paid % Liabilities Paid %

deposit and loan accounts 354 275 18 410 5,20 320 237 14 751 4,61current and savings accounts 79 876 672 0,84 72 043 584 0,81Negotiable certificates of deposit 82 210 5 138 6,25 89 319 5 134 5,75other interest-bearing liabilities2 37 796 2 594 6,86 34 194 2 042 5,97

long-term debt instruments 34 516 2 844 8,23 29 275 2 356 8,05

Interest-bearing banking liabilities 588 673 29 658 5,04 545 068 24 867 4,56other liabilities 13 223 10 971revaluation of fvtpl-designated liabilities 761 1 454derivative financial instruments 931 2 602investment contract liabilities 15 765 13 581ordinary shareholders’ equity 62 274 54 395

minority shareholders’ equity 3 824 3 724

Total shareholders’ equity and liabilities 685 451 29 658 4,33 631 795 24 867 3,94

Interest margin on average interest-earning banking assets 652 194 22 961 3,52 594 715 21 220 3,57Where possible, averages are calculated on daily balances.1 Includes term loans, preference shares, factoring debtors, other lending-related instruments and interest on derivatives.2 Includes foreign currency liabilities.PIPS = properties in possession.FVTPL = fair value through profit and loss.


41b

marGiN maNaGemeNtMargin summary analysis

2014 2013

Nedbank Group Basis points Rm Basis points Rm

Interest-earning banking assets (year-to-date average) 652 194 594 715

Opening net interest margin (NIM)/net interest income (NII) 357 21 220 353 19 680

Growth in banking assets 2 051 1 338

Johannesburg Interbank Agreed Rate (JIBAR)/Prime reset risk due to rate change 1 58

Asset margin pricing and mix (15) (998) (2) (117)

impact due to pricing (3) (188) 1 79

impact due to mix change (12) (810) (3) (196)

Endowment 10 662 1 28

capital 2 138 (1) (68)

deposits 8 524 2 96

Liability pricing and mix (1) (61) 2 102

impact due to pricing (2) (118) (3) (172)

impact due to mix change 1 34 1 43

change in marginal cost of wholesale funding 19 3 172

cost of enhancing liquidity risk profile (Basel iii) 4 1 59

Other 29 3 189

Closing NIM/NII for the year ended 352 22 961 357 21 220

Net interest incomeFavourable Unfavourable

■ strong advances growth across wholesale advances, the rest of africa, vehicle finance and cards.

■ increased pricing for home loans and personal loans. ■ Net interest margin endowment benefit from interest rate increases

of 75 basis points. ■ improved risk-based pricing. ■ pragmatic transitional regulatory requirements.

■ muted consumer demand resulting in weak retail advances growth. ■ higher growth in lower-yielding wholesale advances. ■ pressure on funding costs pressures as a result of increased

competition for Basel-friendly deposits. ■ increased competition for wholesale banking assets. ■ eti funding (but profits in associate income). ■ higher levels of low-yielding high-quality liquid assets in line with the

liquidity coverage ratio transitional requirements.

Net interest margin%

NIM

20142013201220112010

3,52

3,57

3,53

3,48

3,36

RmNet interest incomeRm

NET INTEREST INCOME

20142013201220112010

22 9

61

21 2

20

19 6

80

18 0

34

16 6

08

Rm

42b

Lending spread versus credit loss ratio (including target range) of Nedbank Group

2014201320122010

bps

CLR = credit loss ratio

Lending spread (banking financial assets)

Credit loss ratio (CLR)

Current CLR target range (80 – 120 bps)Old CLR target range(60 – 100 bps)

274

79

222

136

106

Δ = 177Δ = 171Δ = 86

276 283

105

Δ = 195

LENDING SPREAD VERSUS CREDIT LOSS RATIO (INCLUDING TARGET RANGE) OF NEDBANK GROUP

2011

261

113

Δ = 148

Lending spread versus credit loss ratio (including target range) of Nedbank Retail

2014201320122010

bps

LENDING SPREAD VERSUS, CREDIT LOSS RATIO, (INCLUDING TARGET RANGES) OF NEDBANK RETAIL

419

170

Δ = 249

216

Δ = 209Δ = 206Δ = 38

201

407 425

305

267

Lending spread (banking financial assets)

Credit loss ratio (CLR)

Current CLR target range (190 – 260 bps)Old CLR target range (150 – 220 bps)

2011

Δ = 181

379

198

Interest margin trends versus prime rate of Nedbank Group

3,52

20142013201220112010

%

Nedbank Group NIM (LHS)

Average prime rate (RHS)

%

9,9

9,08,5

8,89,1

7,5

8,5

9,5

10,5

3,35

3,40

3,45

3,50

3,55

3,60

3,36

3,48

3,57

3,53

INTEREST MARGIN TRENDS VERSUS PRIME RATE OF NEDBANK GROUP

NIM = net interest margin.


43b

■ Nedbank Group’s lending spread less credit loss ratio (clr) has steadily been improving since 2010 from 0,86% to 1,95% in 2014, driven by both an improving lending spread (albeit slightly lower in 2014 when compared with the prior period, largely due to advances mix changes) and a lower clr.

� the improvement in the group’s net lending spread is largely due to an improved net lending spread in the Nedbank retail cluster.

� the improvement in Nedbank retail’s net lending spread is the result of a higher lending spread as well as an improved clr.

� the retail cluster’s improvement in lending spread is mainly due to:

— higher lending margins from improved risk-based pricing within the home loans and personal loans portfolios.

— an advances mix benefit resulting from a greater proportion of higher-yielding assets, specifically personal loans through to 2013, motor vehicle finance and cards, together with a slowdown in the home loans portfolio, which is lower yielding than the cluster.

� the retail cluster’s clr has improved since 2010 due to: — selective asset origination and strong risk management

resulting in a significant decrease in nonperforming loans since 2009.

— Buildup of provisions since 2009, ensuring that less additional balance sheet portfolio provisions were necessary in the current period.

44b

Notes to the coNsolidated statemeNt of compreheNsive iNcome (continued)

2 impairmeNt of loaNs aNd advaNces

RmNedbank

CapitalNedbank

Corporate

Nedbank Retail and Business

Banking Nedbank Retail

Nedbank Business Banking

Nedbank Wealth

Rest of Africa Division2 Centre2 2014 2013

opening balance 497 911 9 536 8 255 1 281 168 187 157 11 456 10 870specific impairment 323 482 6 528 5 693 835 141 85 (16) 7 543 7 443

specific impairment excluding discounts 320 323 5 644 5 000 644 17 (1) (16) 6 287 5 976specific impairment for discounted cashflow losses 3 159 884 693 191 124 86 1 256 1 467

portfolio impairment 174 429 3 008 2 562 446 27 102 173 3 913 3 427impairments charge and recoveries 109 448 4 644 4 354 290 46 48 152 5 447 6 453

statement of comprehensive income charge net of recoveries 106 400 3 771 3 500 271 41 35 153 4 506 5 565specific impairment1 44 244 3 890 3 694 196 42 17 3 4 240 5 302Net increase/(decrease) in impairment for discounted cashflow losses (2) 94 (209) (200) (9) 1 19 (97) (211)

portfolio impairment1 64 62 90 6 84 (2) (1) 150 363 474recoveries 3 48 873 854 19 5 13 (1) 941 888

amounts written off/other transfers (265) (219) (5 247) (5 009) (238) (46) (55) 24 (5 808) (5 867)specific impairment (268) (204) (5 247) (5 009) (238) (46) (29) (1) (5 795) (5 879)portfolio impairment 3 (15) (26) 25 (13) 12

total impairments 341 1 140 8 933 7 600 1 333 168 180 333 11 095 11 456specific impairment 100 664 5 835 5 032 803 143 105 (15) 6 832 7 543

specific impairment excluding discounts 99 411 5 160 4 539 621 18 (15) 5 673 6 287specific impairment for discounted cashflow losses 1 253 675 493 182 125 105 1 159 1 256

portfolio impairment 241 476 3 098 2 568 530 25 75 348 4 263 3 913

Total gross loans and advances 105 942 200 697 277 815 210 663 67 152 24 987 14 253 422 624 116 590 828

details on segmental impairments and defaulted loans and advances are disclosed in the risk and Balance sheet management review – credit risk section.

Reconciliation of specific impairment for discounted cashflow losses

Rm

opening balance 3 159 884 693 191 124 86 1 256 1 467Net increase/(decrease) in impairment for discounted cashflow losses (2) 94 (209) (200) (9) 1 19 (97) (211)interest on specifically impaired loans and advances (21) (89) (730) (617) (113) (33) (20) (893) (977)Net specific impairments charge for discounted cashflow losses 19 183 521 417 104 34 39 796 766

Closing balance 1 253 675 493 182 125 105 1 159 1 256

1 Reclassification of R73m was made between portfolio to specific impairments charge due to a restatement of defaulted advances within the MFC portfolio.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. In line with strategic intent

we now report ‘Rest of Africa Division’ as a separate division and combine ‘Shared Services’ with ‘Central management’ as ‘Centre’.

Impairments charge on loans and advances

Rm

IMPAIRMENTS CHARGE

20142013201220112010

4 50

6

5 56

5

5 19

9

5 33

1

6 18

8

RmCredit loss ratio – banking advances

%

CREDIT LOSS RATIO

20142013201220112010

0,79

1,06

1,05

1,13

1,36

%


45b

2 impairmeNt of loaNs aNd advaNces

RmNedbank

CapitalNedbank

Corporate

Nedbank Retail and Business

Banking Nedbank Retail

Nedbank Business Banking

Nedbank Wealth

Rest of Africa Division2 Centre2 2014 2013

opening balance 497 911 9 536 8 255 1 281 168 187 157 11 456 10 870specific impairment 323 482 6 528 5 693 835 141 85 (16) 7 543 7 443

specific impairment excluding discounts 320 323 5 644 5 000 644 17 (1) (16) 6 287 5 976specific impairment for discounted cashflow losses 3 159 884 693 191 124 86 1 256 1 467

portfolio impairment 174 429 3 008 2 562 446 27 102 173 3 913 3 427impairments charge and recoveries 109 448 4 644 4 354 290 46 48 152 5 447 6 453

statement of comprehensive income charge net of recoveries 106 400 3 771 3 500 271 41 35 153 4 506 5 565specific impairment1 44 244 3 890 3 694 196 42 17 3 4 240 5 302Net increase/(decrease) in impairment for discounted cashflow losses (2) 94 (209) (200) (9) 1 19 (97) (211)

portfolio impairment1 64 62 90 6 84 (2) (1) 150 363 474recoveries 3 48 873 854 19 5 13 (1) 941 888

amounts written off/other transfers (265) (219) (5 247) (5 009) (238) (46) (55) 24 (5 808) (5 867)specific impairment (268) (204) (5 247) (5 009) (238) (46) (29) (1) (5 795) (5 879)portfolio impairment 3 (15) (26) 25 (13) 12

total impairments 341 1 140 8 933 7 600 1 333 168 180 333 11 095 11 456specific impairment 100 664 5 835 5 032 803 143 105 (15) 6 832 7 543

specific impairment excluding discounts 99 411 5 160 4 539 621 18 (15) 5 673 6 287specific impairment for discounted cashflow losses 1 253 675 493 182 125 105 1 159 1 256

portfolio impairment 241 476 3 098 2 568 530 25 75 348 4 263 3 913

Total gross loans and advances 105 942 200 697 277 815 210 663 67 152 24 987 14 253 422 624 116 590 828

details on segmental impairments and defaulted loans and advances are disclosed in the risk and Balance sheet management review – credit risk section.

Reconciliation of specific impairment for discounted cashflow losses

Rm

opening balance 3 159 884 693 191 124 86 1 256 1 467Net increase/(decrease) in impairment for discounted cashflow losses (2) 94 (209) (200) (9) 1 19 (97) (211)interest on specifically impaired loans and advances (21) (89) (730) (617) (113) (33) (20) (893) (977)Net specific impairments charge for discounted cashflow losses 19 183 521 417 104 34 39 796 766

Closing balance 1 253 675 493 182 125 105 1 159 1 256

1 Reclassification of R73m was made between portfolio to specific impairments charge due to a restatement of defaulted advances within the MFC portfolio.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. In line with strategic intent


ImpairmentsFavourable Unfavourable

■ Benefits from early actions in personal loans and home loans, and improvement in our retail business in general.

■ Quality portfolios across the group, with all clusters within or below their through-the-cycle target ranges.

■ impact of mix change as wholesale advances grew faster than retail advances.

■ increased levels of postwriteoff recoveries. ■ decreases in non-performing loans across all clusters. ■ increased levels of portfolio, specific and total coverage.

■ increased central provision for market uncertainties. ■ increase in NGr in selected wholesale counters as a result of macro

developments. ■ increase in early arrears in mfc and card.

46b


3 NoN-iNterest reveNUe

Nedbank Group Nedbank Capital Nedbank CorporateNedbank Retail

and Business Banking Nedbank Retail Nedbank Business Banking Nedbank Wealth Rest of Africa Division2 Centre2

Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

commission and fee income 14 570 14 023 613 614 1 600 1 430 9 978 9 790 8 422 8 196 1 556 1 594 1 783 1 650 609 542 (13) (3)administration fees 733 472 13 12 413 229 409 224 4 5 268 200 33 24 6 7 cash-handling fees 882 844 153 125 611 612 256 253 355 359 2 1 116 106 insurance commission 624 613 423 431 419 427 4 4 189 171 12 11 exchange commission 456 400 141 115 221 214 87 86 134 128 63 47 26 19 5 5 other fees 2 342 2 212 545 579 372 339 69 69 69 69 1 240 1 120 157 134 (41) (29)Guarantees income 174 169 121 117 44 43 4 3 40 40 1 9 8 card income 2 996 2 759 2 968 2 734 2 891 2 658 77 76 28 25 service charges 3 497 3 605 33 36 3 314 3 441 2 829 2 907 485 534 17 13 133 116 (1)other commission 2 866 2 949 68 35 767 686 1 915 2 017 1 527 1 638 388 379 4 97 95 99 17 15

insurance income 1 986 1 927 354 456 354 456 1 630 1 470 1 1 1 fair-value adjustments 35 40 (12) 4 (49) 176 22 (41) 14 (44) 8 3 74 (99)

fair-value adjustments 73 46 (12) 4 (49) 176 22 (41) 14 (44) 8 3 112 (93)fair-value adjustments – own debt (38) (6) (38) (6)

trading income 2 648 2 564 2 404 2 347 30 148 145 46 50 102 95 66 72 foreign exchange 1 202 1 187 958 970 30 148 145 46 50 102 95 66 72 debt securities 1 194 1 146 1 194 1 146 equities 227 208 227 208 commodities 25 23 25 23

private-equity income 423 225 160 64 263 161 security dealing – realised 350 34 60 290 34 security dealing – unrealised (11) 33 60 (91) (71) 124 dividends received 84 158 40 155 44 3

investment income 105 56 33 31 6 5 12 16 1 1 11 15 3 12 39 4 dividends received 92 41 33 31 6 5 1 1 1 1 1 12 39 4 long-term asset sales 13 15 11 15 11 15 2

sundry income1 545 526 8 18 406 172 16 14 (17) (8) 33 22 (17) (39) 80 61 52 300

Total non-interest revenue 20 312 19 361 3 206 3 078 2 256 1 944 10 530 10 380 8 820 8 651 1 710 1 729 3 399 3 081 768 675 153 203

1 Sundry income includes, inter alia, the income from property partners.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. ‘Rest of Africa Division’

is reported as a separate division and ‘Shared Services’ was combined with ‘Central management’ as ‘Centre’.

Non-interest revenue

Rm

NON-INTEREST REVENUE

20142013201220112010

20 3

12

19 3

61

17 3

24

15 4

12

13 2

15

RmNon-interest revenue to total operating expenses

%

NON-INTEREST REVENUE TO TOTAL OPERATING EXPENSES

20142013201220112010

82,8

86,4

84,2

81,5

79,6

%


47b

3 NoN-iNterest reveNUe

Nedbank Group Nedbank Capital Nedbank CorporateNedbank Retail


Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

commission and fee income 14 570 14 023 613 614 1 600 1 430 9 978 9 790 8 422 8 196 1 556 1 594 1 783 1 650 609 542 (13) (3)administration fees 733 472 13 12 413 229 409 224 4 5 268 200 33 24 6 7 cash-handling fees 882 844 153 125 611 612 256 253 355 359 2 1 116 106 insurance commission 624 613 423 431 419 427 4 4 189 171 12 11 exchange commission 456 400 141 115 221 214 87 86 134 128 63 47 26 19 5 5 other fees 2 342 2 212 545 579 372 339 69 69 69 69 1 240 1 120 157 134 (41) (29)Guarantees income 174 169 121 117 44 43 4 3 40 40 1 9 8 card income 2 996 2 759 2 968 2 734 2 891 2 658 77 76 28 25 service charges 3 497 3 605 33 36 3 314 3 441 2 829 2 907 485 534 17 13 133 116 (1)other commission 2 866 2 949 68 35 767 686 1 915 2 017 1 527 1 638 388 379 4 97 95 99 17 15

insurance income 1 986 1 927 354 456 354 456 1 630 1 470 1 1 1 fair-value adjustments 35 40 (12) 4 (49) 176 22 (41) 14 (44) 8 3 74 (99)

fair-value adjustments 73 46 (12) 4 (49) 176 22 (41) 14 (44) 8 3 112 (93)fair-value adjustments – own debt (38) (6) (38) (6)

trading income 2 648 2 564 2 404 2 347 30 148 145 46 50 102 95 66 72 foreign exchange 1 202 1 187 958 970 30 148 145 46 50 102 95 66 72 debt securities 1 194 1 146 1 194 1 146 equities 227 208 227 208 commodities 25 23 25 23

private-equity income 423 225 160 64 263 161 security dealing – realised 350 34 60 290 34 security dealing – unrealised (11) 33 60 (91) (71) 124 dividends received 84 158 40 155 44 3

investment income 105 56 33 31 6 5 12 16 1 1 11 15 3 12 39 4 dividends received 92 41 33 31 6 5 1 1 1 1 1 12 39 4 long-term asset sales 13 15 11 15 11 15 2

sundry income1 545 526 8 18 406 172 16 14 (17) (8) 33 22 (17) (39) 80 61 52 300

Total non-interest revenue 20 312 19 361 3 206 3 078 2 256 1 944 10 530 10 380 8 820 8 651 1 710 1 729 3 399 3 081 768 675 153 203

1 Sundry income includes, inter alia, the income from property partners.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. ‘Rest of Africa Division’

is reported as a separate division and ‘Shared Services’ was combined with ‘Central management’ as ‘Centre’.

Non-interest revenueFavourable Unfavourable

■ continued increase in client numbers and cross-sell across the group, driving commission and fee growth.

■ strong uptake of digital channels. ■ improved performance in the second half of the year. ■ favourable market valuations and realisations in commercial-

property and investment banking private-equity portfolios. ■ Better-than-anticipated short-term insurance claims, combined with

continued growth momentum in non-traditional insurance. ■ fair-value gains in the second half as expectations of interest rate

hikes decreased.

■ Keeping bank fees at 2013 levels and fee reductions in Business Banking and retail relationship Banking.

■ low-volume growth in tough consumer environment. ■ planned slowdown in personal-loan volumes. ■ reduction in credit life pricing, with increased benefits. ■ 2013 base effects from insurance releases and renewable-energy

transactions.

48b


4 eXpeNses



Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

staff costs 13 838 12 629 1 185 1 103 1 208 1 143 6 809 6 289 5 416 5 019 1 393 1 270 1 261 1 144 632 520 2 743 2 430salaries and wages 11 114 10 126short-term incentives 2 100 1 833long-term employee benefits 29 116share-based payment expenses – employees 595 554

computer processing 3 097 2 720 200 176 301 266 695 566 621 519 74 47 109 90 69 60 1 723 1 562depreciation for computer equipment 412 356amortisation of computer software 654 584operating lease charges for computer equipment 281 238other computer processing expenses 1 750 1 542

communication and travel 835 820 111 112 116 115 394 391 351 349 43 42 64 61 43 38 107 103occupation and accommodation 1 987 1 838 67 59 153 136 1 560 1 479 1 424 1 352 136 127 122 107 112 94 (27) (37)marketing and public relations 1 517 1 451 47 41 41 38 825 799 746 725 79 74 104 114 37 31 463 428fees and insurances 2 260 2 042 89 106 472 391 949 877 874 799 75 78 254 181 116 120 380 367office equipment and consumables 493 454 15 9 67 61 260 237 249 227 11 10 16 17 36 37 99 93other sundries 396 344 24 26 32 27 205 156 194 145 11 11 43 29 31 48 61 58amortisation of intangible assets 64 64 64 64activity-justified transfer pricing 514 520 16 (12) 4 371 4 019 2 809 2 562 1 562 1 457 444 409 179 177 (5 524) (5 113)

Bee transaction expenses 47 57 4 4 2 4 8 11 5 8 3 3 3 2 1 1 29 35

Total operating expenses 24 534 22 419 2 256 2 156 2 408 2 169 16 076 14 824 12 689 11 705 3 387 3 119 2 484 2 218 1 256 1 126 54 (74)

1 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. In line with strategic intent we now report ‘Rest of Africa Division’ as a separate division and combine ‘Shared Services’ with ‘Central management’ as ‘Centre’.

Total operating expenses

Rm

TOTAL OPERATING EXPENSES

20142013201220112010

24 5

34

22 4

19

20 5

63

18 9

19

16 5

98

RmEfficiency ratio

%

EFFICIENCY RATIO

20142013201220112010

56,5

55,2

55,6

56,6

55,7

%


49b

ExpensesFavourable Unfavourable

■ synergies and cost savings realised across the bank. ■ managing our costs wisely across discretionary spend items. ■ as part of ‘250 to 60’ it system rationalisation a reduction of core

systems by 74 to date.

■ incentive increases on the back of strong financial performance. ■ higher information technology spend as we invest in systems, client

innovations and capacity. ■ increasing headcount in line with expansion in outlets. ■ Growing cost of regulatory compliance, security and cash

management. ■ regional expansion into the rest of africa.

4 eXpeNses



Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

staff costs 13 838 12 629 1 185 1 103 1 208 1 143 6 809 6 289 5 416 5 019 1 393 1 270 1 261 1 144 632 520 2 743 2 430salaries and wages 11 114 10 126short-term incentives 2 100 1 833long-term employee benefits 29 116share-based payment expenses – employees 595 554

computer processing 3 097 2 720 200 176 301 266 695 566 621 519 74 47 109 90 69 60 1 723 1 562depreciation for computer equipment 412 356amortisation of computer software 654 584operating lease charges for computer equipment 281 238other computer processing expenses 1 750 1 542

communication and travel 835 820 111 112 116 115 394 391 351 349 43 42 64 61 43 38 107 103occupation and accommodation 1 987 1 838 67 59 153 136 1 560 1 479 1 424 1 352 136 127 122 107 112 94 (27) (37)marketing and public relations 1 517 1 451 47 41 41 38 825 799 746 725 79 74 104 114 37 31 463 428fees and insurances 2 260 2 042 89 106 472 391 949 877 874 799 75 78 254 181 116 120 380 367office equipment and consumables 493 454 15 9 67 61 260 237 249 227 11 10 16 17 36 37 99 93other sundries 396 344 24 26 32 27 205 156 194 145 11 11 43 29 31 48 61 58amortisation of intangible assets 64 64 64 64activity-justified transfer pricing 514 520 16 (12) 4 371 4 019 2 809 2 562 1 562 1 457 444 409 179 177 (5 524) (5 113)

Bee transaction expenses 47 57 4 4 2 4 8 11 5 8 3 3 3 2 1 1 29 35

Total operating expenses 24 534 22 419 2 256 2 156 2 408 2 169 16 076 14 824 12 689 11 705 3 387 3 119 2 484 2 218 1 256 1 126 54 (74)


Total employees (excluding temporary staff)

TOTAL EMPLOYEES (EXCLUDING TEMPORARY STAFF)

20142013201220112010

30 4

99

29 5

13

28 7

48

28 4

94

27 5

25

50b


5 taXatioN charGe2014 2013

South African normal taxation (Rm)current 3 380 3 074deferred (33) (164)

foreign taxation 180 134

current and deferred taxation on income 3 527 3 044prior-year under/(over)provision – current 221 (131)

prior-year (over)/underprovision – deferred (261) 120

total taxation on income 3 487 3 033

tax on non-trading and capital items (19) (18)

Total 3 468 3 015

Taxation rate reconciliation (excluding non-trading and capital items) (%)Standard rate of South African normal taxation 28,0 28,0reduction of taxation rate:– dividend income (2,4) (2,8)– capital items 0,1 (0,2)– foreign income and 9d (0,5) (0,4)

– other 0,1 0,6

total taxation on income as percentage of profit before taxation 25,3 25,2

6 NoN-coNtrolliNG iNterest – ordiNarY shareholders2014 2013

RmBalance

sheetIncome

statementBalance

sheetIncome

statement

Nedbank (swaziland) 165 38 136 28Nedbank (Namibia) – various subsidiaries 14 1 5 1Nedbank (malawi) 3 3mBca Bank (Zimbabwe) 127 17 98 11ideas Nedbank aiif investors trust 17 13 4 (11)

reit investments (pty) ltd (1)

326 69 246 28


51b

7 prefereNce shares

Dividends declaredNumber of

sharesCents

per shareAmount

Rm

2013Nedbank – final dividend no 20 declared for 2012 – paid march 2013 358 277 491 35,82649 128

Nedbank – interim dividend no 21 declared for 2013 – paid september 2013 358 277 491 35,12556 126

254

2014Nedbank – final dividend no 22 declared for 2013 – paid march 2014 358 277 491 35,70775 128

Nedbank – interim dividend no 23 declared for 2014 – paid september 2014 358 277 491 36,86072 132

260

2015Nedbank – final dividend no 24 declared for 2014 – payable march 2015 358 277 491 38,76140 139

Dividends declared calculations DaysRate

%Amount

Rm

2014Nedbank – 1 January 2014 – 30 June 2014 184 138,9

1 July 2014 – 17 July 2014 17 7,500 12,518 July 2014 – 31 december 2014 167 7,708 126,4

Total declared 138,9

Dividends paid calculations DaysRate

%Amount

Rm

2013 (Paid March 2014)Nedbank – 1 July 2013 – 31 december 2013 184 7,083 127,9

2014 (Paid September 2014)Nedbank – 1 January 2014 – 30 June 2014 181 132,1

1 January 2014 – 29 January 2014 29 7,083 20,230 January 2014 – 30 June 2014 152 7,500 111,9

Nedbank (MFC) – Participating preference shares1 63,2

Profit attributable to preference shareholders 323,2

2012 (Paid March 2013)Nedbank – 1 July 2012 – 31 December 2012 184 128,4

1 July 2012 – 19 July 2012 19 7,500 14,020 July 2012 – 31 december 2012 165 7,083 114,4

2013 (Paid September 2013)Nedbank – 1 January 2013 – 30 June 2013 181 7,083 125,8

Nedbank (MFC) – Participating preference shares1 37,7

Profit attributable to preference shareholders 291,91 Profit share calculated on an annual basis.

52b


8 loaNs aNd advaNces

Segmental breakdown Nedbank Group Nedbank Capital Nedbank CorporateNedbank Retail


Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013home loans 137 449 136 156 10 621 119 561 119 113 102 239 101 977 17 322 17 136 14 430 13 448 3 651 3 213 (203) (239)commercial mortgages 123 652 106 325 101 795 85 982 15 784 15 202 634 652 15 150 14 550 5 608 4 762 713 591 (248) (212)properties in possession 596 772 388 498 176 258 167 242 9 16 32 16 credit cards 13 404 11 441 13 376 11 428 13 215 11 281 161 147 28 13 overdrafts 16 141 15 048 7 2 2 137 2 635 10 607 9 588 1 498 1 599 9 109 7 989 119 111 3 271 2 712 term loans 106 175 97 528 20 293 14 992 64 108 58 388 19 009 21 893 17 086 20 129 1 923 1 764 989 781 1 779 1 478 (3) (4)

personal loans 18 346 21 145 17 088 20 131 17 086 20 129 2 2 7 1 1 251 1 013 other term loans 87 829 76 383 20 293 14 992 64 108 58 388 1 921 1 762 1 921 1 762 982 780 528 465 (3) (4)

overnight loans 21 638 17 927 20 513 17 265 607 695 1 607 694 518 469 (502)other loans to clients 69 161 70 976 55 545 56 408 2 068 1 600 5 215 4 811 315 210 4 900 4 601 3 524 2 858 1 940 4 680 869 619

foreign client lending 12 512 12 658 10 173 7 532 1 357 874 435 636 1 1 434 635 547 3 616 remittances in transit 195 237 (25) 5 15 2 158 63 151 70 7 (7) 3 47 164 other loans1 56 454 58 081 45 397 48 871 696 724 4 622 4 112 163 139 4 459 3 973 3 524 2 855 1 346 900 869 619

leases and instalment debtors 94 237 85 038 3 436 3 400 88 220 79 680 75 509 67 599 12 711 12 081 284 273 2 330 1 708 (33) (23)preference shares and debentures 18 098 18 984 11 523 12 845 6 242 5 758 269 292 269 292 1 1 23 23 40 65 factoring accounts 4 986 4 796 (5) 4 991 4 796 4 991 4 796 deposits placed under reverse repurchase agreements 18 291 25 796 18 291 25 796 trade, other bills and bankers’ acceptances 288 41 288 3 38 loans and advances before impairments 624 116 590 828 105 942 110 046 200 697 176 185 277 815 267 756 210 663 203 690 67 152 64 066 24 987 22 250 14 253 14 887 422 (296)impairment of advances (11 095) (11 456) (341) (497) (1 140) (911) (8 933) (9 536) (7 600) (8 255) (1 333) (1 281) (168) (168) (180) (187) (333) (157)Total loans and advances 613 021 579 372 105 601 109 549 199 557 175 274 268 882 258 220 203 063 195 435 65 819 62 785 24 819 22 082 14 073 14 700 89 (453)

Comprises:– loans and advances to clients 602 175 557 956 91 905 83 827 194 831 174 033 277 808 267 693 210 512 203 620 67 145 64 073 23 421 20 814 13 939 14 271 422 (2 682)– loans and advances to banks 21 941 32 872 14 037 26 219 5 866 2 152 7 63 151 70 7 (7) 1 566 1 436 314 616 2 386 Loans and advances before impairments 624 116 590 828 105 942 110 046 200 697 176 185 277 815 267 756 210 663 203 690 67 152 64 066 24 987 22 250 14 253 14 887 422 (296)1 Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. In line with strategic intent


marKet share as per Ba900Home loans (%)Home loans (%)

5,2

34,5

14,5

19,5

26,3

Dec 2011 Dec 2012 Dec 2013 Dec 2014

OtherStandard BankNedbankFirstRandAbsa

Commercial-mortgage loans (%)Commercial mortgage loans (%)

19,6

19,3

41,4

6,3

13,4


Dec 2011 Dec 2012 Dec 2013 Dec 2014


53b

8 loaNs aNd advaNces



Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013home loans 137 449 136 156 10 621 119 561 119 113 102 239 101 977 17 322 17 136 14 430 13 448 3 651 3 213 (203) (239)commercial mortgages 123 652 106 325 101 795 85 982 15 784 15 202 634 652 15 150 14 550 5 608 4 762 713 591 (248) (212)properties in possession 596 772 388 498 176 258 167 242 9 16 32 16 credit cards 13 404 11 441 13 376 11 428 13 215 11 281 161 147 28 13 overdrafts 16 141 15 048 7 2 2 137 2 635 10 607 9 588 1 498 1 599 9 109 7 989 119 111 3 271 2 712 term loans 106 175 97 528 20 293 14 992 64 108 58 388 19 009 21 893 17 086 20 129 1 923 1 764 989 781 1 779 1 478 (3) (4)

personal loans 18 346 21 145 17 088 20 131 17 086 20 129 2 2 7 1 1 251 1 013 other term loans 87 829 76 383 20 293 14 992 64 108 58 388 1 921 1 762 1 921 1 762 982 780 528 465 (3) (4)

overnight loans 21 638 17 927 20 513 17 265 607 695 1 607 694 518 469 (502)other loans to clients 69 161 70 976 55 545 56 408 2 068 1 600 5 215 4 811 315 210 4 900 4 601 3 524 2 858 1 940 4 680 869 619

foreign client lending 12 512 12 658 10 173 7 532 1 357 874 435 636 1 1 434 635 547 3 616 remittances in transit 195 237 (25) 5 15 2 158 63 151 70 7 (7) 3 47 164 other loans1 56 454 58 081 45 397 48 871 696 724 4 622 4 112 163 139 4 459 3 973 3 524 2 855 1 346 900 869 619

leases and instalment debtors 94 237 85 038 3 436 3 400 88 220 79 680 75 509 67 599 12 711 12 081 284 273 2 330 1 708 (33) (23)preference shares and debentures 18 098 18 984 11 523 12 845 6 242 5 758 269 292 269 292 1 1 23 23 40 65 factoring accounts 4 986 4 796 (5) 4 991 4 796 4 991 4 796 deposits placed under reverse repurchase agreements 18 291 25 796 18 291 25 796 trade, other bills and bankers’ acceptances 288 41 288 3 38 loans and advances before impairments 624 116 590 828 105 942 110 046 200 697 176 185 277 815 267 756 210 663 203 690 67 152 64 066 24 987 22 250 14 253 14 887 422 (296)impairment of advances (11 095) (11 456) (341) (497) (1 140) (911) (8 933) (9 536) (7 600) (8 255) (1 333) (1 281) (168) (168) (180) (187) (333) (157)Total loans and advances 613 021 579 372 105 601 109 549 199 557 175 274 268 882 258 220 203 063 195 435 65 819 62 785 24 819 22 082 14 073 14 700 89 (453)

Comprises:– loans and advances to clients 602 175 557 956 91 905 83 827 194 831 174 033 277 808 267 693 210 512 203 620 67 145 64 073 23 421 20 814 13 939 14 271 422 (2 682)– loans and advances to banks 21 941 32 872 14 037 26 219 5 866 2 152 7 63 151 70 7 (7) 1 566 1 436 314 616 2 386 Loans and advances before impairments 624 116 590 828 105 942 110 046 200 697 176 185 277 815 267 756 210 663 203 690 67 152 64 066 24 987 22 250 14 253 14 887 422 (296)1 Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital.2 Previously the Rest of Africa divisional results were included with the ‘Centre’ results as ‘Central management including Rest of Africa’, and ‘Shares Services’ were reported as a separate division. In line with strategic intent


Credit cards (%)Credit cards (%)

10,2

27,4

12,9

17,9

31,6


Dec 2011 Dec 2012 Dec 2013 Dec 2014

Personal loans (%)Personal loans (%)

50,4

14,8

10,0

15,6

9,2


Dec 2011 Dec 2012 Dec 2013 Dec 2014

Instalment credit (%)Instalment credit (%)

2,0

17,6

26,0

35,1

19,3


Dec 2011 Dec 2012 Dec 2013 Dec 2014

Corporate loans (%)Corporate loans (%)

16,2

20,7

17,7

25,5

19,9


Dec 2011 Dec 2012 Dec 2013 Dec 2014

54b


9 iNvestmeNt secUritiesRm 2014 20131

Listed investments 635 826private-equity portfolio 624 819other 11 7

Unlisted investments 3 228 3 390taquanta asset managers portfolio 424 421strate limited 51 43private-equity portfolio 1 194 1 506other 1 559 1 420

total listed and unlisted investments 3 863 4 216

listed policyholder investments at market value 11 576 11 088equities 193 219Government, public and private sector stock 979 808Unit trusts 10 404 10 061

Unlisted policyholder investments at directors’ valuation 4 658 4 133Negotiable certificates of deposit, money market and other short-term funds 4 658 4 133

Net policyholder liabilities (68) (89)

total policyholder investments 16 166 15 132

Total investment securities 20 029 19 348

Summary of total private-equity investmentsInvestment securities 1 818 2 325

Property investments 624 969Unlisted investments 150

Other investments 1 194 1 356Unlisted investments 1 194 1 356

Investment in associates 898 850Unlisted property investments 524 507Unlisted other investments 374 343

Private-equity shareholder loans and mezzanine debt facilities 2 644 2 452

Total private-equity investments 5 360 5 6271 Certain investments were reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align

better with industry practice. No adjustments to the carrying value of the financial instruments arose as a result of the reclassification.


55b

10 iNtaNGiBle assetsRm note 2014 2013

computer software and capitalised development costs 11.1 3 145 2 806Goodwill 11.2 5 141 5 126client relationships, contractual rights and other 293 358

8 579 8 290

10.1 Computer software and capitalised development costs – carrying amount

RmAmortisation

periods 2014 2013

Computer software 2-10 years 2 318 1 984client product systems 884 798infrastructure and supporting systems 948 751risk management systems 356 322channel systems 130 113

Capitalised development costs none1 827 822client product systems 230 284infrastructure and supporting systems 530 512risk management systems 46 8channel systems 21 18

3 145 2 806Computer softwareopening balance 1 984 1 587additions 257 273commissioned during period 766 669disposals and retirements (2) (1)foreign exchange and other moves 1 45amortisation charge for the period (655) (584)impairments (33) (5)closing balance 2 318 1 984

Capitalised development costsopening balance 822 872additions 809 683commissioned during period (766) (669)foreign exchange and other moves (2)impairments (38) (62)closing balance 827 8221 Assets not yet commissioned and only begins amortisation once transferred to computer software.

10.2 Goodwill – carrying amountRm 2014 2013

carrying amount at the beginning of the year 5 126 5 041acquisition 2foreign currency translation 15 83carrying amount at the end of the year 5 141 5 126

10.3 Intangible assets – ratiosRm 2014 2013

total assets 809 313 749 594ordinary shareholders’ equity 67 024 60 617intangible assets 8 579 8 290

capitalised software (refer note 11.1) 3 145 2 806Goodwill (refer note 11.2) 5 141 5 126other intangible assets 293 358

intangible assets/total assets (%) 1,06 1,11intangible assets/ordinary shareholders’ equity (%) 12,8 13,7

56b


11 iNvestmeNts iN private eQUitY associates, associate compaNies aNd JoiNt arraNGemeNts

Percentage holding Acquisition

Equity-accounted earnings

Rm Carrying amount

Rm

Netindebtedness of loansto/(from) associates

Rm

Name of company and nature of business 2014 2013 Date Year-end 2014 2013 2014 2013 2014 2013

Private-equity associates and associate companiesListedecobank transnational incorporated (togo)1 20,7 oct 14 dec 146 6 2235 466Unlistedcentury city Jv 50 50 dec 10 dec 55 55 erf 7 sandown (pty) ltd 35 35 Jul 07 feb 63 57 5 5 falcon forest trading 85 (pty) ltd 30 mar 05 feb 40 2 friedshelf 113 (pty) ltd 20 20 aug 02 feb 85 83 43 43 masingita property investment holdings (pty) ltd 35 35 aug 05 feb 125 83 38 14 odyssey developments (pty) ltd2 49 49 aug 07 feb 57 79 49 43 individually immaterial associates3

private-equity associates (manufacturing, industrial, leisure and other)4 373 342 235 242 private-equity associates (property investment associates)4 123 125 1 270 1 103

other 12 27 238 230 (4) 2 Joint arrangementsUnlisted

Banco Único, sa (mozambique) 37 Jun 14 dec 3 286

individually immaterial joint arrangements 42 7 55 35

161 27 7 670 1 101 2 157 1 489

there are no regulatory constraints, apart from the provisions of the companies act, 71 of 2008 (as amended), that restrict the distribution of funds to the shareholders. distribution of funds may, however, be restricted by loan agreements that the entities have entered into. all associates and joint arrangements are considered to be strategic to the group’s activities.

Unless otherwise stated, all entities are domiciled and incorporated in sa. the group has the same proportion of voting rights as its proportion of ownership interest, unless stated otherwise, and has not incurred any contingent liabilities with regard to the associates or joint arrangements listed above.

1 Ecobank Transnational Incorporated is a Pan-African bank and its shares are listed on the stock exchanges of Nigeria, Ghana and Ivory Coast.2 The group’s proportion of ownership in the entity is 49%, while its voting right equates to 35%.3 Represents various investments that are not individually material.4 Includes entities that have been reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align better with industry practice.5 Based on the ETI share price at year end the market value was R5,5bn. We assessed the indictors of impairment as at 31 December 2014 in terms of International accounting Standard (IAS) 39 and, inter alia, took into

consideration ETI shares trade in low volume, the price is therefore subject to volatility and does not reflect the underlying financial and strategic value of the investment to the Nedbank Group. Therefore we did not impair the carrying value of our investment at 31 December 2014.


57b

11 iNvestmeNts iN private eQUitY associates, associate compaNies aNd JoiNt arraNGemeNts

Percentage holding Acquisition

Equity-accounted earnings

Rm Carrying amount

Rm

Netindebtedness of loansto/(from) associates

Rm

Name of company and nature of business 2014 2013 Date Year-end 2014 2013 2014 2013 2014 2013

Private-equity associates and associate companiesListedecobank transnational incorporated (togo)1 20,7 oct 14 dec 146 6 2235 466Unlistedcentury city Jv 50 50 dec 10 dec 55 55 erf 7 sandown (pty) ltd 35 35 Jul 07 feb 63 57 5 5 falcon forest trading 85 (pty) ltd 30 mar 05 feb 40 2 friedshelf 113 (pty) ltd 20 20 aug 02 feb 85 83 43 43 masingita property investment holdings (pty) ltd 35 35 aug 05 feb 125 83 38 14 odyssey developments (pty) ltd2 49 49 aug 07 feb 57 79 49 43 individually immaterial associates3

private-equity associates (manufacturing, industrial, leisure and other)4 373 342 235 242 private-equity associates (property investment associates)4 123 125 1 270 1 103

other 12 27 238 230 (4) 2 Joint arrangementsUnlisted

Banco Único, sa (mozambique) 37 Jun 14 dec 3 286

individually immaterial joint arrangements 42 7 55 35

161 27 7 670 1 101 2 157 1 489

there are no regulatory constraints, apart from the provisions of the companies act, 71 of 2008 (as amended), that restrict the distribution of funds to the shareholders. distribution of funds may, however, be restricted by loan agreements that the entities have entered into. all associates and joint arrangements are considered to be strategic to the group’s activities.

Unless otherwise stated, all entities are domiciled and incorporated in sa. the group has the same proportion of voting rights as its proportion of ownership interest, unless stated otherwise, and has not incurred any contingent liabilities with regard to the associates or joint arrangements listed above.

1 Ecobank Transnational Incorporated is a Pan-African bank and its shares are listed on the stock exchanges of Nigeria, Ghana and Ivory Coast.2 The group’s proportion of ownership in the entity is 49%, while its voting right equates to 35%.3 Represents various investments that are not individually material.4 Includes entities that have been reclassified from investment securities to investments in private-equity associates, associate companies and joint arrangements to align better with industry practice.5 Based on the ETI share price at year end the market value was R5,5bn. We assessed the indictors of impairment as at 31 December 2014 in terms of International accounting Standard (IAS) 39 and, inter alia, took into

consideration ETI shares trade in low volume, the price is therefore subject to volatility and does not reflect the underlying financial and strategic value of the investment to the Nedbank Group. Therefore we did not impair the carrying value of our investment at 31 December 2014.

58b

Notes to the coNsolidated statemeNt of compreheNsive iNcome (continued)at 31 december

12 amoUNts oWed to depositors


and Business BankingNedbank

RetailNedbank

Business Banking Nedbank Wealth Rest of Africa Division1 Centre1

Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

current accounts 65 170 58 704 665 602 4 728 3 278 54 321 49 854 32 1 1 1 29 622 22 210 20 232 1 375 1 195 3 999 3 695 82 80 savings accounts 25 386 22 631 3 3 9 244 9 019 8 992 8 778 252 241 15 309 12 867 830 734 8 other deposits and loan accounts 449 705 407 593 102 075 86 278 172 633 167 172 157 289 140 242 76 514 69 043 80 775 71 199 9 438 7 642 8 274 6 578 (4) (319)

call and term deposits 257 634 237 393 9 200 7 511 115 426 113 394 120 818 106 807 47 613 41 776 73 205 65 031 8 658 7 270 3 816 2 870 (284) (459)fixed deposits 42 800 38 289 8 914 6 215 3 235 2 869 28 538 27 216 27 397 26 091 1 141 1 125 180 149 1 933 1 840 cash management deposits 60 820 56 571 110 261 53 639 50 635 5 666 4 610 12 18 5 654 4 592 598 219 798 629 9 217 other deposits 88 451 75 340 83 851 72 291 333 274 2 267 1 609 1 492 1 158 775 451 2 4 1 727 1 239 271 (77)

foreign client liabilities 30 153 14 309 21 908 5 199 4 645 5 781 3 249 2 813 517 488 2 732 2 325 351 516 Negotiable certificates of deposit 70 377 87 457 160 2 398 3 528 2 883 66 689 82 176

deposits received under repurchase agreements 12 659 12 258 12 583 11 749 76 509

Total amounts owed to depositors 653 450 602 952 137 391 106 226 182 009 176 234 224 103 201 928 118 134 107 931 105 969 93 997 26 122 21 704 17 058 14 406 66 767 82 454

comprises: – amounts owed to clients 604 294 557 645 96 588 66 298 179 161 172 125 223 543 201 560 117 583 107 569 105 960 93 991 26 122 21 704 15 363 13 513 63 517 82 445

– amounts owed to banks 49 156 45 307 40 803 39 928 2 848 4 109 560 368 551 362 9 6 1 695 893 3 250 9



marKet share as per Ba900Wholesale deposits (%)Wholesale deposits (%)

16,8

21,8

20,3

19,621

,5


Dec 2011 Dec 2012 Dec 2013 Dec 2014

Commercial deposits (%)Commercial deposits (%)

12,5

27,3

16,6

24,7

18,9


Dec 2011 Dec 2012 Dec 2013 Dec 2014


59b

12 amoUNts oWed to depositors


and Business BankingNedbank

RetailNedbank

Business Banking Nedbank Wealth Rest of Africa Division1 Centre1

Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

current accounts 65 170 58 704 665 602 4 728 3 278 54 321 49 854 32 1 1 1 29 622 22 210 20 232 1 375 1 195 3 999 3 695 82 80 savings accounts 25 386 22 631 3 3 9 244 9 019 8 992 8 778 252 241 15 309 12 867 830 734 8 other deposits and loan accounts 449 705 407 593 102 075 86 278 172 633 167 172 157 289 140 242 76 514 69 043 80 775 71 199 9 438 7 642 8 274 6 578 (4) (319)

call and term deposits 257 634 237 393 9 200 7 511 115 426 113 394 120 818 106 807 47 613 41 776 73 205 65 031 8 658 7 270 3 816 2 870 (284) (459)fixed deposits 42 800 38 289 8 914 6 215 3 235 2 869 28 538 27 216 27 397 26 091 1 141 1 125 180 149 1 933 1 840 cash management deposits 60 820 56 571 110 261 53 639 50 635 5 666 4 610 12 18 5 654 4 592 598 219 798 629 9 217 other deposits 88 451 75 340 83 851 72 291 333 274 2 267 1 609 1 492 1 158 775 451 2 4 1 727 1 239 271 (77)

foreign client liabilities 30 153 14 309 21 908 5 199 4 645 5 781 3 249 2 813 517 488 2 732 2 325 351 516 Negotiable certificates of deposit 70 377 87 457 160 2 398 3 528 2 883 66 689 82 176

deposits received under repurchase agreements 12 659 12 258 12 583 11 749 76 509


comprises: – amounts owed to clients 604 294 557 645 96 588 66 298 179 161 172 125 223 543 201 560 117 583 107 569 105 960 93 991 26 122 21 704 15 363 13 513 63 517 82 445

– amounts owed to banks 49 156 45 307 40 803 39 928 2 848 4 109 560 368 551 362 9 6 1 695 893 3 250 9



Household deposits (%)1Household deposits (%)

16,1

20,5

18,820

,324,3


Dec 2011 Dec 2012 Dec 2013 Dec 2014

Household sector deposits (%)2Household sector deposits (%)

14,0

23,8

18,921

,122,2


Dec 2011 Dec 2012 Dec 2013 Dec 2014

1 Includes 'households' as per SARB BA900 return.2 Includes 'households', 'non-profit organisation, saving households' and 'unincorporated' business enterprises as per SARB BA900 return.

60b

Notes to the coNsolidated statemeNt of fiNaNcial positioN

13 loNG-term deBt iNstrUmeNts

Instrument code

Date callable

Date repayable

Nominal value

Instrument terms up to callable date

Instrument terms after callable date

Interest on notes payable 2014 2013

Subordinated debt 9 817 8 949 Rm 8 654 7 895

Callable notes (rand-denominated)

Ned08 8 feb 2014 8 feb 2019 1 700 8,90% per annumfloating 3-month JiBar + 2,17% Biannually 1 765

Ned09 6 Jul 2017 6 Jul 2022 2 000 JiBar + 0,47% per annumfloating 3-month JiBar + 2,20% Quarterly 2 031 2 026

Ned11 17 sept 2015 17 sept 2020 1 000 10,54% per annumfloating 3-month JiBar + 2,85% Biannually 1 048 1 070

Ned13 25 Jul 2018 25 Jul 2023 1 800 JiBar + 2,75 per annumfloating 3-month JiBar + 2,75% Quarterly 1 828 1 826

Ned14 29 Nov 2018 29 Nov 2023 1 200 JiBar + 2,55% per annumfloating 3-month JiBar + 2,55% Quarterly 1 209 1 208

Ned15 8 apr 2019 8 apr 2024 450 10,49% per annumfixed at 10,49% per annum Biannually 461

Ned16 8 apr 2019 8 apr 2024 1 737 JiBar + 2,55% per annumfloating 3-month JiBar + 2,55% Quarterly 1 771

Ned17 14 oct 2019 14 oct 2024 300 JiBar + 2,75% per annumfloating 3-month JiBar + 2,75% Quarterly 306

Long-term debenture (Namibian dollar-denominated) NAM$mNamibia 2030 15 sept 2030 40 17% per annum until

15 september 2000 –thereafter zero coupon1 4 3

Callable notes (US dollar-denominated) US$m

emtN01 3 mar 2017 3 mar 2022 100 3-month Us$ liBor3-month Us$ liBor + 3,00% 1 159 1 051

Hybrid subordinated debtCallable notes (rand-denominated) Rm 1 900 1 831

Nedh1a 20 Nov 2018 20 Nov 2018 487 15,05% per annumfloating 3-month JiBar + 712,5 bps Biannually 575 552

Nedh1B 20 Nov 2018 20 Nov 2018 1 265 JiBar + 4,75% per annumfloating 3-month JiBar + 712,5 bps Quarterly 1 325 1 279

Securitised liabilitiesCallable notes (rand-denominated) Rm 1 395 1 593

Grh1a1 25 oct 2017 25 oct 2039 480 JiBar + 1,1% per annum3-month JiBar + 1,49% Quarterly 32 232



Grh1B 25 oct 2017 25 oct 2039 110 JiBar + 1,90% per annum3-month JiBar + 2,57% Quarterly 111 111


61b

13 loNG-term deBt iNstrUmeNts

Instrument code

Date callable

Date repayable

Nominal value

Instrument terms up to callable date

Instrument terms after callable date

Interest on notes payable 2014 2013

Senior unsecured debtSenior unsecured notes (rand-denominated) Rm 22 511 20 882 NBK2a 15 sept 2015 3 244 10,55% per annum Biannually 3 347 3347NBK2B 15 sept 2015 1 044 JiBar + 2,20% per annum Quarterly 1 054 1053NBK3a 9 sept 2019 1 273 11,39% per annum Biannually 1 385 1397NBK4 28 oct 2024 660 Zero coupon 263 236NBK6a 19 apr 2015 478 9,68% per annum Biannually 487 487NBK6B 19 apr 2015 1 027 JiBar + 1,75% per annum Quarterly 1 043 1041NBK7B 19 apr 2020 80 JiBar + 2,15% per annum Quarterly 81 81NBK8a 24 mar 2014 450 8,39% per annum Biannually 460NBK8B 24 mar 2014 988 JiBar + 1,05% per annum Quarterly 869NBK9a 23 mar 2016 1 137 9,36% per annum Biannually 1 166 1166NBK9B 23 mar 2016 677 JiBar + 1,25% per annum Quarterly 678 678NBK10a 25 Jul 2016 151 6,91% per annum Biannually 154 155NBK10B 21 apr 2014 500 JiBar + 1,00% per annum Quarterly 455NBK11a 28 Nov 2020 1 888 8,92% per annum Biannually 1 903 1903NBK11B 27 oct 2014 1 075 JiBar + 0,94% per annum Quarterly 1086NBK12a 19 mar 2021 855 9,38% per annum Biannually 878 NBK12B 20 feb 2015 1 297 JiBar + 1,00% per annum Quarterly 1 307 1306NBK13a 19 mar 2024 391 9,73% per annum Biannually 402 NBK13B 21 feb 2017 405 JiBar + 1,30% per annum Quarterly 408 408NBK14a 25 Jun 2021 500 9,29% per annum Biannually 501 NBK14B 27 aug 2015 250 JiBar + 1,00% per annum Quarterly 252 251NBK15B 27 aug 2017 786 JiBar + 1,31% per annum Quarterly 700 730NBK16B 25 Jul 2016 3 056 JiBar + 0,8% per annum Quarterly 3 068 3074NBK17B 28 Nov 2016 694 JiBar + 0,75% per annum Quarterly 698 699NBK18B 20 mar 2017 1 035 JiBar + 0,85% per annum Quarterly 1 037 NBK19B 26 Jun 2017 806 JiBar + 0,9% per annum Quarterly 806 NBK20B 24 Jun 2021 650 JiBar + 1,3% per annum Quarterly 650 NBK21B 10 Nov 2017 241 JiBar + 1,12% per annum Quarterly 243 OtherUnsecured debentures (rand-denominated) Rm

30 Nov 2029 200 Zero coupon 15 13

Total long-term debt instruments in issue 35 638 33 268

during the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Group limited. the Us dollar subordinated-debt instruments are either matched by advances to clients or covered against exchange rate fluctuations. in accordance with the group's articles of association, the borrowing powers of the company are unlimited.

62b

Notes to the coNsolidated statemeNt of fiNaNcial positioN (continued)

14 ordiNarY share capital aNd premiUm 2014 2013

PriceR

Number of shares

mTotal

Rm

Ordinary share

capitalRm

Ordinary share

premiumRm

Number of shares

mTotal

Rm

Ordinary share

capitalRm

Ordinary share

premiumRm

total shares listed 499,3 20 139 499 19 640 510,3 21 012 510 20 502 less: treasury shares held 33,7 2 892 33 2 859 49,1 4 208 49 4 159 Bought back – capital management 109,04 14,7 1 613 15 1 598

executed h2 2005 97,2 1,0 100 1 99 executed h1 2006 111,7 5,5 616 6 610 executed h2 2006 109,2 8,2 897 8 889

Bee transaction shares 22,8 1 247 22 1 225 23,4 1 237 23 1 214 other shares held by group entities

restricted share scheme 10,9 1 645 11 1 634 11,0 1 358 11 1 347

Net shares reported 465,6 17 247 466 16 781 461,2 16 804 461 16 343

Bee = Black economic empowerment.

earNiNGs per share aNd WeiGhted-averaGe shares

Earnings per share BasicDiluted

basic HeadlineDiluted

headline

2014Earnings for the year 9 796 9 796 9 880 9 880 Weighted-average number of ordinary shares 464 442 212 478 235 002 464 442 212 478 235 002 Earnings per share (cents) 2 109 2 049 2 127 2 066 2013earnings for the year 8 637 8 637 8 670 8 670Weighted-average number of ordinary shares 460 167 246 474 122 091 460 167 246 474 122 091earnings per share (cents) 1 877 1 822 1 884 1 829

Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted-average number of shares in issue.

fully diluted basic earnings and fully diluted headline earnings per share are calculated by dividing the relevant earnings amount by the weighted-average number of shares in issue after taking the dilutive impact of potential ordinary shares to be issued into account (the estimated future dilutive shares arising from the Bee transaction – refer note 15).

Number of weighted-average dilutive-potential ordinary shares (000)potential shares are the total number of shares arising from historic grants, schemes or awards, available for distribution. the number of potential shares, the strike price at issuance date, potential funding charges and imputed costs, the future share-based payments (sBp) charge, allocated compared to unallocated, and the date of issuance are taken into account to determine the weighted-average dilutive shares.

2014 2013

Potential sharesWeighted-average

dilutive sharesWeighted-average

dilutive shares

Traditional schemes 15 927 8 727 8 849 Nedbank Group restricted share scheme (2005) 13 920 7 685 8 068 Nedbank Group matched share scheme (2005) 2 007 1 042 781 Total BEE schemes 13 103 5 066 5 106BEE schemes – South Africa 12 725 4 863 4 927 Black Business partners1 7 891 2 709 2 226 community 851 851 851 Black executives 1 252 484 434 Black management 2 731 819 1 416 BEE schemes – Namibia 378 203 179 Black Business partners 200 109 91 affinity Groups 74 40 34 education 99 53 45 Black management 5 1 9

total 29 030 13 793 13 955 1 Subsequent to year-end the Black Business Partners scheme was wound down, with the Black Business Partners participants retaining 6 848 413 shares.


63b

NedbaNk Group employee iNceNtive schemesfor the year ended 31 december

Dec 2014 Dec 2013

Summary by schemeNedbank Group restricted share scheme (2005) 9 868 390 10 710 356Nedbank Group matched share scheme (2005) 1 649 950 1 274 562instruments outstanding at the end of the period 11 518 340 11 984 918

Analysis

performance-based – restricted shares 4 996 285 P 5 355 178 pNon-performance-based – restricted shares 4 872 105 5 355 178performance-based – matched shares 824 975 P 637 281 pNon-performance-based – matched shares 824 975 637 281instruments outstanding at the end of the period 11 518 340 11 984 918

Movements

instruments outstanding at the beginning of the period 11 984 918 12 239 342Granted 4 176 781 4 127 553exercised (3 819 118) (3 801 643)surrendered (824 241) (580 334)instruments outstanding at the end of the period 11 518 340 11 984 918

Nedbank Group (2005) restricted and matched share schemes restricted sharesdetails of instruments granted and not exercised at 31 december 2014 and the resulting dilutive effect:

Instrument expiry dateNumber

of shares

8 mar 2015 1 605 360 P9 mar 2015 1 605 360 7 aug 2015 49 696 P8 aug 2015 49 696 7 mar 2016 1 585 079 P8 mar 2016 1 596 063 15 aug 2016 43 655 P16 aug 2016 43 655 7 mar 2017 1 702 658 P8 mar 2017 1 567 494 15 sep 2017 9 837 P16 sep 2017 9 837 restricted shares not exercised at 31 december 2014 9 868 390unallocated shares 994 943Treasury shares 10 863 333average shares exercised or forfeited during the year 3 057 065total potential shares 13 920 398Weighted-average dilutive shares appliable for the year 7 685 0431 Restricted shares are issued at a market price for no consideration to participants, and are held by the scheme until expiry date (subject to achievement of performance conditions). Participants have full rights and receive dividends.P Performance-based instruments.

Matched sharesthe obligation to deliver the following matched shares, 50% subject to time and the other 50% to performance criteria, exists at 31 december 2014 and the resulting dilutive effect.

matched shares are not issued and therefore not registered as treasury shares; however, until they are issued there remains a potential dilutive effect.

Instrument expiry dateNumber

of shares

1 apr 2015 397 292 1 apr 2016 558 283 1 apr 2017 694 375 matched shares not exercised at 31 december 2014 1 649 950 movements due to shares exercised/forfeited during the year 357 113total potential shares 2 007 063Weighted-average dilutive shares appliable for the year 1 042 363

64b

NedbaNk Group estimated bee dilutive shares aNd ifrs 2 charGefor the year ended 31 december

Dec 2013 m

Dec 2014 m

Dec 2015 Forecasted

vestings1

m

Dec 2016 Forecasted

vestings1

m

Dec 2017 Forecasted

vestings1

m

Treasury shares – actual 23,4 22,8 8,9 7,4 6,5bee 22,5 21,9bee Namibia 0,9 0,9

Potential shares – average3 14,5 13,1bee 14,1 12,7bee Namibia 0,4 0,4

Dilutive shares – average4 5,1 5,1 1,8 0,8 0,5bee 4,9 4,9bee Namibia 0,2 0,2

Estimated future dilutive BEE shares2

5% 1,7 0,8 0,510% 1,8 0,8 0,515% 1,8 0,9 0,620% 1,8 0,9 0,630% 1,9 1,0 0,7

Number of BEE shares vesting per year 9,2 1,5 0,9Estimated statement of comprehensive income charge2 rm Rm rm rm rm5% 33,0 22,1 43,7 41,1 38,510% 33,0 22,1 44,3 41,8 40,015% 33,0 22,1 46,1 43,9 41,7

20% 33,0 22,1 47,3 45,2 43,3

30% 33,0 22,1 49,8 48,0 46,41 Forecast calculated on 10% share price growth.2 Sensitivity calculated on various share price growth assumptions.3 Potential shares are the total number of shares arising from historic grants, schemes or awards. The remaining shares in the trusts available for distribution and not distributed are not recognised as potential shares.4 The weighted-average dilutive shares are calculated from the number of potential shares, the strike prices at issuance date, potential funding charges and imputed costs, the future share-based payments (SBP) charge, allocated

compared to unallocated and the date of issuance.


65b

shareholders’ aNalysis

register date: 31 december 2014authorised share capital: 600 000 000 sharesissued share capital: 499 257 807 shares

Number of shares

Dec 2014% holding

Dec 2013% holding

Major shareholders/Managersold mutual life assurance company (sa) limited and associates 269 776 225 54,04 52,03Nedbank Group treasury shares 33 614 889 6,74 9,63bee trusts: 22 704 044eyethu scheme – Nedbank south africa 21 876 437 4,38 4,42omufima scheme – Nedbank Namibia 827 607 0,17 0,15

Nedbank Group (2005) share option, matched share and restricted share scheme and Nest 10 863 333 2,18 2,17Nedbank Group limited and associates (capital management) 2,88Nedbank Namibia limited 47 512 0,01 0,01coronation fund managers (sa) 33 029 067 6,62 5,99public investment corporation (sa) 32 746 778 6,56 6,37lazard asset management (us and uk) 13 498 914 2,70 3,15dimensional fund advisors (us, uk and au) 7 905 186 1,58 1,46blackrock inc (us and uk) 7 893 372 1,58 1,66sanlam investment management (sa) 7 657 157 1,53 1,95

Major beneficial shareholdersold mutual life assurance company (sa) limited and associates (sa) 269 776 225 54,04 52,03Government employees pension fund (sa) 36 859 230 7,38 7,51

Geographical distribution of shareholdersDomestic 429 687 651 86,07 86,85south africa 416 008 435 83,33 85,36Namibia 9 736 799 1,95 1,00swaziland 48 500 0,01 0,01unclassified 3 893 917 0,78 0,48

Foreign 69 570 156 13,93 13,15united states of america 37 305 236 7,47 7,95united kingdom and ireland 6 537 519 1,31 1,28europe 10 220 780 2,05 1,48other countries 15 506 621 3,10 2,44

499 257 807 100,00 100,00

2014 share price relative performance (%)at 31 december 2014

141

138

123

119

111

Three-year share price relative performance (%)at 31 december 2014

244

187

172

145

129

FINI 15

FINI 15

66b

NedbaNk Group cateGories of fiNaNcial iNstrumeNts at 31 december 2014

At fair value through profit or loss

Rm TotalHeld for trading Designated

Available-for-sale

financial assets

Held-to-maturity

investmentsLoans and

receivables

Financialliabilities at amortised

cost

Non-financialassets and

liabilitiesAssetscash and cash equivalents 13 339 13 339other short-term securities 67 234 9 629 15 689 9 323 32 593derivative financial instruments 15 573 15 573Government and other securities 27 177 5 491 8 691 2 653 9 245 1 097loans and advances 613 021 26 947 60 241 40 525 793other assets 8 715 2 113 383 6 219current taxation assets 291 291investment securities 20 029 19 541 488Non-current assets held for sale 16 16investment in private-equity associates, associate companies and joint arrangements 7 670 898 6 772deferred taxation assets 309 309investment property 130 130property and equipment 7 773 7 773postemployment assets 4 546 4 546mandatory reserve deposits with central bank 14 911 14 911intangible assets 8 579 8 579Total assets 809 313 59 753 105 443 12 504 41 838 561 359 28 416Total equity and liabilitiesordinary share capital 466 466ordinary share premium 16 781 16 781reserves 49 777 49 777Total equity attributable to equity holders 67 024 67 024minority shareholders’ equity attributable to ordinary shareholders 326 326minority shareholders’ equity attributable to preference shareholders 3 561 3 561Total equity 70 911 70 911derivative financial instruments 15 472 15 472amounts owed to depositors 653 450 77 201 39 576 536 673other liabilities 13 788 4 509 9 279current taxation liabilities 134 134deferred taxation liabilities 931 931postemployment liability 3 071 3 071investment contract liabilities 11 747 11 747insurance contract liabilities 4 171 4 171long-term debt instruments 35 638 2 040 33 598Total liabilities 738 402 97 182 57 534 579 550 4 136Total equity and liabilities 809 313 97 182 57 534 579 550 75 047

Classifications in terms of IAs 39a financial asset or financial liability at fair value through profit or loss is an asset or liability held that was either acquired to sell or repurchase in the short term, or is managed on a portfolio basis for short-term gains, or is a derivative or is an asset or liability that has been designated for classification and valuation as fair value through profit and loss.available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss and are held at fair value with fair-value gains and losses recorded directly within equity and not through profit and loss.held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date that an entity has the positive intention and ability to hold to maturity.loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are carried at an accrued value and not fair-valued.financial liabilities at amortised cost are non-derivative liabilities carried at amortised cost and not fair-valued.Non-financial assets and liabilities are all other assets and liabilities that fall outside the scope of ias 39.


67b

NedbaNk limited coNsolidated statemeNt of fiNaNcial positioN – baNkiNG/tradiNG cateGorisatioNat 31 december

2014 2013

Rm Banking Trading Eliminations Total Banking Trading Eliminations Total

Assetscash and cash equivalents 13 335 4 13 339 20 837 5 20 842 other short-term securities 58 787 15 012 (6 565) 67 234 32 076 20 034 (9 659) 42 451 derivative financial instruments 116 16 873 (1 416) 15 573 105 14 782 (1 497) 13 390 Government and other securities 36 486 6 880 (16 189) 27 177 46 081 5 490 (19 480) 32 091 loans and advances 586 016 27 005 613 021 541 889 37 483 579 372 other assets 6 159 2 556 8 715 4 871 3 802 8 673 current taxation assets 291 291 565 565 investment securities 20 029 20 029 19 343 5 19 348 Non-current assets held for sale 16 16 12 12 investments in private-equity associates, associate companies and joint arrangements 7 670 7 670 1 101 1 101 deferred taxation assets 165 144 309 70 146 216 property and equipment 7 900 3 7 903 7 027 5 7 032 long-term employee benefit assets 4 546 4 546 2 980 2 980 mandatory reserve deposits with central banks 14 911 14 911 13 231 13 231 intangible assets 8 568 11 8 579 8 270 20 8 290

interdivisional assets 56 793 (56 793) 29 579 (29 579)

Total assets 764 995 125 281 (80 963) 809 313 698 458 111 351 (60 215) 749 594

Total equity and liabilitiesallocated capital 64 007 3 017 67 024 57 948 2 669 60 617 Non-controlling interest attributable to:– ordinary shareholders 326 326 246 246

– preference shareholders 3 561 3 561 3 473 3 473

Total equity 67 894 3 017 70 911 61 667 2 669 64 336 derivative financial instruments 1 498 15 390 (1 416) 15 472 1 677 16 400 (1 497) 16 580 amounts owed to depositors 576 163 85 403 (8 116) 653 450 545 317 67 637 (10 002) 602 952 other liabilities 7 028 21 398 (14 638) 13 788 9 220 24 599 (19 137) 14 682 current taxation liabilities 128 6 134 303 (2) 301 deferred taxation liabilities 864 67 931 741 48 789 long-term employee benefit liabilities 3 071 3 071 1 842 1 842 investment contract liabilities 11 747 11 747 11 523 11 523 insurance contract liabilities 4 171 4 171 3 321 3 321 long-term debt instruments 35 638 35 638 33 268 33 268

interdivisional liabilities 56 793 (56 793) 29 579 (29 579)

Total liabilities 697 101 122 264 (80 963) 738 402 636 791 108 682 (60 215) 685 258

Total equity and liabilities 764 995 125 281 (80 963) 809 313 698 458 111 351 (60 215) 749 594

68b

NedbaNk limited coNsolidated statemeNt of compreheNsive iNcomefor the year ended 31 december

Rm 2014 2013

interest and similar income 50 075 44 107

interest expense and similar charges 28 322 23 873

Net interest income 21 753 20 234

impairments charge on loans and advances 4 478 5 529

income from lending activities 17 275 14 705

Non-interest revenue 16 196 15 466

operating income 33 471 30 171 total operating expenses 22 031 20 199

indirect taxation 522 480

profit from operations before non-trading and capital items 10 918 9 492 Non-trading and capital items (96) (59)

revaluation of investment properties 4

profit from operations 10 822 9 437

share of profits of associate companies and joint arrangements 12 28

profit before direct taxation 10 834 9 465

total direct taxation 2 786 2 297

Profit for the year 8 048 7 168

Other comprehensive income net of taxation 126 932 exchange differences on translating foreign operations 14 96 fair-value adjustments on available-for-sale assets (113) (108)actuarial losses on long-term employee benefit assets 62 726 (loss)/Gain on property revaluations 163 218

Total comprehensive income for the year 8 174 8 100

Profit attributable to:– ordinary and preference equity holders 7 998 7 152

– Non-controlling interest – ordinary shareholders 50 16

Profit for the year 8 048 7 168

Total comprehensive income attributable to:– ordinary and preference equity holders 8 123 8 084

– Non-controlling interest – ordinary shareholders 51 16

Total comprehensive income for the year 8 174 8 100

Headline earnings reconciliationprofit attributable to ordinary and preference equity holders 7 998 7 152

less: Non-headline earnings items net of taxation (79) (37)

Headline earnings attributable to ordinary and preference equity holders 8 077 7 189

fiNaNcial hiGhliGhtsfor the year ended 31 december

% change 2014 2013

headline earnings (rm) 12,4 8 077 7 189 return on ordinary shareholders' equity (%) 16,5 16,3 return on total assets (%) 1,13 1,10 Net interest income to average interest-earning banking assets (%) 3,55 3,59 Non-interest revenue to total operating expenses (%) 73,5 76,6

credit loss ratio – banking advances (%) 0,82 1,10


69b

NedbaNk limited coNsolidated statemeNt of fiNaNcial positioNat 31 december

Rm 2014 2013

Assetscash and cash equivalents 10 757 17 467 other short-term securities 56 322 35 004 derivative financial instruments 15 644 13 811 Government and other securities 26 828 31 279 loans and advances 603 329 566 047 other assets 5 393 4 204 current taxation assets 236 340 investment securities 2 369 2 932 Non-current assets held for sale 16 12 investments in private-equity associates, associate companies and joint arrangements 1 158 1 098 deferred taxation assets 165 69 investment property 87 property and equipment 7 459 6 571 long-term employee benefit assets 4 409 2 847 mandatory reserve deposits with central banks 14 843 13 199

intangible assets 4 516 4 188

Total assets 753 444 699 155

Total equity and liabilitiesordinary share capital 27 27 ordinary share premium 17 422 17 422

reserves 34 787 30 524

Total equity attributable to equity holders of the parent 52 236 47 973 preference share capital and premium 3 561 3 561

minority shareholders' equity attributable to ordinary shareholders 183 141

Total equity 55 980 51 675 derivative financial instruments 15 479 16 588 amounts owed to depositors 634 623 585 497 other liabilities 8 404 10 016 current taxation liabilities 35 13 deferred taxation liabilities 287 297 long-term employee benefit liabilities 3 002 1 804

long-term debt instruments 35 634 33 265

Total liabilities 697 464 647 480

Total equity and liabilities 753 444 699 155

70b

Notes:

RISK AN

D BA

LAN

CE SHEET M

AN

AG

EMEN

T REVIEW



RISK AND BALANCE SHEET MANAGEMENT REVIEW


1c

Comprehensive publiC disClosure report (pillar 3)The report in this Results Booklet is a summary focusing on the key risks and balance sheet management components of Nedbank Group. For the group’s comprehensive public disclosure on risk and balance sheet management, in line with regulation 43 of the regulations relating to banks in SA, kindly refer to the group’s updated Pillar 3 Report that will be released on the group’s website, nedbankgroup.co.za, on 31 March 2015.

Highlights 2cCapital management 3cLeverage 13cLiquidity risk and funding 14cCredit risk 18c

Credit concentration risk 36cSecuritisation risk 37cMarket risks 38c

Interest rate risk in the banking book 38cTrading market risk 40cEquity risk in the banking book 41cForeign currency translation risk in the banking book 42cCounterparty credit risk 42c

Operational risk 67c

Contents

2c

hiGhliGhts

The financial performance was underpinned by a robust balance sheet, with a strong capital, liquidity and funding position, as well as sound credit asset quality aided by the group’s strategic portfolio tilt focus, an enabling but prudent risk appetite and excellence in risk management.

■ Nedbank Group remains well capitalised, even after exercising its subscription rights in Ecobank Transnational Incorporated (ETI), with strong capital ratios and low levels of leverage.

■ Nedbank Group remains well funded, with a strong liquidity position, underpinned by a significant quantum of long-term funding, an appropriately sized surplus liquid-asset buffer, compliance with liquidity coverage ratio (LCR) regulatory requirements, a strong loan-to-deposit ratio consistently below 100% and a low reliance on interbank and foreign-currency funding.

■ Market risk remains low with the exception of interest rate risk in the banking book (IRRBB), which is well managed incorporating impairment sensitivity and positioned for the expected rate cycle.

■ Credit risk is well managed and growth is consistent with the group's portfolio tilt strategy. ■ Significant improvement in the credit loss ratio (CLR), which is now below the through-the-cycle (TTC) target range, while total, specific and

portfolio coverage strengthened. ■ Nedbank maintained its momentum in applying the Advanced Measurement Approach (AMA) in managing operational risk. A low percentage

of operational risk loss to gross operating income was experienced during 2014. Single material loss events of more than R5m were of a similar volume when compared with 2013.

Banking Book

payouTsr167bn

(2013: R159bn)

Trading Book – low risk

Basel iii leverage 17,2 times(<20 Times inTernal TargeT

<25 Times regulaTory minimum)

CrediT loss raTio

0,79%(2013: 1,06%)

deFaulTed advanCes as a % oF gross advanCes 2,54%

(2013: 3,02%)

posT- WriTeoFF

reCoveries

r941m(2013: R888m)

speCiFiC Coverage

43,1%(2013: 42,3%)

porTFolio Coverage

0,70%(2013: 0,68%)

gross advanCes groWTh

5,6%(7,9% exCluding

Trading advanCes)

(2013: 9,8%)

irrBB % ordinary shareholders'

equiTy 1,52%

(2013: 1,54%)

neT inTeresT inCome (nii) sensiTiviTy To

1% deCline (r1 019m)

(2013: R936m)

loan-To-deposiT raTio 93,8%

(2013: 96,1%)

ToTal sourCes oF

quiCk liquidiTy

>r120bn(2013: R108bn)

ComplianT WiTh TransiTional

2015 lCr requiremenTs

ToTal CapiTal adequaCy raTio

14,6%(2013: 15,7%)

ToTal Tier 1 12,5%

(2013: 13,6%)

surplus CeT1 CapiTal

r26 874m(2013: R31 253m)

availaBle FinanCial resourCes:

eConomiC CapiTal

140%(2013: 151%)

Common-equiTy Tier 1

(CeT1)11,6%

(2013: 12,5%)

long-Term Funding raTio

25,4%(ahead oF indusTry

average)(2013: 26,2%)


3c

RegulatoRy Capital adequaCyStrong capital ratios above regulatory minimum requirements and within internal target ranges1

SARB minimum2

Internal targets3 2014 2013

Nedbank GroupIncluding unappropriated profitsCommon-equity tier 1 (%) 10,5 – 12,5 11,6 12,5 total tier 1 (%) 11,5 – 13,0 12,5 13,6 total (%) 14,0 – 15,0 14,6 15,7 Surplus Cet1 capital4 (Rm) 26 874 31 253total risk-weighted assets (RWa) (Rm) 440 696 392 926total RWa: total assets (%) >50 54 52

dividend cover (times) 1,75 – 2,25 2,07 2,11

Excluding unappropriated profitsCommon-equity tier 1 (%) 5,5 11,1 11,5 total tier 1 (%) 7,0 12,0 12,7

total (%) 10,0 14,1 14,7

Nedbank LimitedIncluding unappropriated profitsCommon-equity tier 15 (%) 10,5 – 12,5 11,0 10,7 total tier 15 (%) 11,5 – 13,0 12,1 12,1 total5 (%) 14,0 – 15,0 14,7 14,5 Surplus Cet1 capital4 (Rm) 20 134 20 853

total RWa (Rm) 368 823 336 858

Excluding unappropriated profitsCommon-equity tier 1 (%) 5,5 10,5 9,8 total tier 1 (%) 7,0 11,7 11,2

total (%) 10,0 14,3 13,6 1 In line with regulation 38(10) of the Banks Act, profits do not qualify as regulatory capital, unless formally appropriated by the board by way of a resolution. Accordingly, capital ratios are shown above, both including and excluding

unappropriated profits.2 The South African Reserve Bank (SARB) minimum ratios presented at 2014 have increased in line with Basel III phasing-in over 2013 to 2019.3 Nedbank’s internal through-the-cycle (TTC) target ranges are based on the final minimum regulatory requirements of 2019 for CET1 and the 2015 minimum requirements for the total tier 1 and total capital ratios, and are set on the

basis of including unappropriated profits.4 Excluding the bank-specific Pillar 2B add-on.5 The bank target ranges were conservatively adjusted upwards during 2014 to align with the group ranges.

Nedbank Group subsidiaries are well capitalised for the environments within which they operate2014 2013

Capital requirement

(host country)%

RWARm

CET1ratio

%

Total capital ratio

%RWA

Rm

CET1ratio

%

Total capital ratio

%

Rest of AfricaNedbank Namibia limited 10,0 7 725 13,9 16,1 6 739 13,6 15,9Nedbank (Swaziland) limited 8,0 2 636 17,3 1 973 18,5Nedbank (lesotho) limited 8,0 1 501 20,8 1 331 21,5Nedbank (Malawi) limited 10,0 215 21,5 212 19,3MBCa Bank limited 10,0 2 079 19,3 1 467 23,4

United Kingdom

Nedbank private Wealth (ioM) limited 10,0 6 196 15,0 15,0 6 330 14,7 14,7

CAPITAL MANAGEMENT

4c

■ Nedbank group remains well capitalised with a strong capital adequacy position at december 2014. this is supported by: � a strong capital structure with 80% of the group’s capital comprising fully loss-absorbent Cet1 capital; � additional tier 1 and tier 2 capital, in line with regulatory requirements, including the R5,5bn issued since the implementation of Basel iii; � a conservative RWa density of 54% (RWa:total assets ratio), which compares favourably with local and international peers; and � significant capital buffers above regulatory requirements.

■ Capital adequacy is strong relative to Nedbank’s business activities, strategy, risk profile and the external environment in which it operates.

Nedbank Group’s CET1 capital adequacy ratio remains strong and well within internal target ranges even after the group’s significant investment in Ecobank Transnational Incorporated

0,911,6

%

2010Basel II

New Basel III target rangeCET1: 10,5% – 12,5%

2012Basel II.5

2013Basel III

2014 pre RoA1

expansionBasel III

RoA1

expansion2014 post RoA1

expansionBasel III

RWA:total assets

5450

53 5254

CET1 CAR

12,512,511,4

10,1

NEDBANK GROUP’S CET1 CAPITAL ADEQUACY RATIO REMAINS STRONG AND WELL WITHIN INTERNAL TARGET RANGES EVEN AFTER THE GROUP’S SIGNIFICANT INVESTMENT IN ECOBANK TRANSNATIONAL INCORPORATED

Target >50%

1 RoA = Rest of Africa.

■ Nedbank group’s Cet1 ratio declined to 11,6% from 12,5% in 2013 as a result of: � a decrease of 90 basis points due to the acquisition of an approximate 20% shareholding in ecobank transnational incorporated (eti) and a

36,6% shareholding in Banco Único. this resulted in an increase of R10,0bn in ‘investments in financial entities’ RWa in line with the allowed 10% threshold deduction and a capital impairment of R2,5bn above the threshold deduction.

� RWa growth in line with qualifying capital and reserves, due to: — a more conservative downturn loss given default model implementation for the personal loans portfolio, and various other model

enhancements and recalibrations implemented within the Retail Banking, Motor Finance Corporation (MFC) and Corporate portfolios, as well as book growth particularly within the Commercial property Finance and MFC portfolios resulting in an increase in credit RWa of R33,3bn.

— an increase in other assets RWa of approximately R2,1bn due to the postretirement medical aid obligation being transferred into a policy with a related party, which resulted in the recognition of a separate asset and liability in accordance with iaS 19 where previously the asset and liability amounts were offset.

— Market risk RWa was R2,2bn higher in 2014 due to point-in-time market volatility. — operational risk RWa increased by R4,4bn due to an increase in advanced Measurement approach (aMa) risk exposures as a result of an

increase in the three-year average gross operating income.

Nedbank Group’s strong capital ratios, across all classes of capital within Basel III target ranges

10,5% – 12,5% 9,5% 10,0%

5,5% 6,0%

11,5% – 13,0%

14,0% – 15,0%

31,3 26,9 30,0 24,3 24,3

14,6%15,7%

12,5%13,6%11,6%12,5%

20,3

CET1 Tier 1 Total

2014

2013

Basel III internal target range

Basel III regulatory minima (excluding unappropriated profits)

4,5%

7,0%

Surplus (Rbn) above regulatory minima

■ Nedbank group’s total tier 1 capital adequacy ratio (CaR) of 12,5% (2013: 13,6%) was also impacted by further grandfathering of old-style preference shares and hybrid debt instruments, as per regulation 38(13), whereby only 80% of these instruments now qualify as capital, resulting in a further R347m and R175m reduction respectively.

■ Nedbank group’s total CaR of 14,6% (2013: 15,7%) was also impacted by: � the redemption of Ned08 (R1,7bn), an old-style subordinated-debt instrument, at its call date in February 2014, in line with capital plans. � the disqualification of R416m as surplus total capital attributable to minority shareholders in line with regulation 38(16). � the impact of the above was managed through the issuance of R2,5bn new-style Basel iii compliant tier 2 subordinated debt instruments.

Capital MaNageMeNt (continued)


5c

Nedbank Group summary of regulatory capital requirements and risk-weighted assets2014 2013

Risk typeRWA

RmMix

%MRC1

RmRWA

RmMix

%MRC1

Rm

Credit risk 328 154 74 32 815 294 721 75 27 999 advanced internal Ratings-based (aiRB) approach 289 310 66 28 931 260 621 66 24 759 Corporate, sovereign, banks, SMe2 150 237 34 15 024 132 677 34 12 604 Residential mortgages 49 178 11 4 918 45 047 11 4 279 qualifying revolving retail 12 244 3 1 224 10 279 3 977 other retail 77 651 18 7 765 72 618 18 6 899

the Standardised approach 23 274 5 2 327 19 101 5 1 815 Corporate, sovereign, banks, SMe2 15 210 3 1 521 11 472 3 1 090 Retail exposures 8 064 2 806 7 629 2 725

Non-regulated entities 15 570 3 1 557 14 999 4 1 425Counterparty credit risk Current exposure Method 3 929 1 393 3 794 1 360

Securitisation risk internal Ratings-based approach 2 048 <1 205 2 354 1 224

Equity risk Market-based Simple Risk Weight approach 13 998 3 1 399 18 038 5 1 714 listed (300% risk weighting) 1 984 <1 198 2 634 <1 250 unlisted (400% risk weighting) 12 014 3 1 201 15 404 4 1 463

Trading market risk internal Model approach3 6 889 2 689 4 666 1 443

Operational risk 55 185 13 5 519 50 805 13 4 826 advanced Measurement approach 51 746 12 5 175 47 845 12 4 545 the Standardised approach 3 439 1 344 2 960 <1 281

Other assets 30 493 7 3 050 18 548 5 1 762100% risk weighting 17 166 4 1 717 15 024 4 1 427 threshold deduction items: 250% risk weighting4 13 327 3 1 333 3 524 <1 335

Total 440 696 100 44 070 392 926 100 37 328

total MRC1 44 070 37 328 pillar 1 MRC5 35 256 31 434 pillar 2a MRC6 8 814 5 894

Total qualifying capital and reserves7 64 385 61 637

Total surplus capital over MRC8 20 315 24 309

Analysis of total surplus capital7, 8 Cet1 26 874 31 253total tier 1 24 282 30 030

total 20 315 24 309 1 Total minimum required capital (MRC) is measured at 10,0% (9,5% in 2013) in line with SARB regulations and circular 5/2011.2 SME = Small- and medium-sized enterprises.3 The Standardised Approach (TSA) is immaterial (approximately 5% of trading market risk RWA), hence it has been aggregated with the IMA portion.4 Includes the aggregate of investments in other financial entities and other items that fall within the Basel III 10% of CET1 capital threshold as per regulation 38(5)(i).5 Pillar 1 MRC is measured at 8% in line with SARB regulations.6 Pillar 2a MRC is measured at 2% (1,5% in 2013) in line with the phasing-in of Basel III minimum regulatory capital ratios.7 Includes unappropriated profits.8 The decrease in the surplus capital over MRC is largely due to an increase in the minimum capital ratio from 9,5% in 2013 to 10% in 2014 per Basel III transitional arrangements and the acquisition of an approximate 20% stake

in ETI.

6c


Nedbank Limited1 summary of regulatory capital requirements and risk-weighted assets2014 2013

Risk typeRWA

RmMix

%MRC2

RmRWA

RmMix

%MRC2

Rm

Credit risk 285 271 77 28 527 259 159 77 24 620 advanced internal Ratings-based approach 283 337 76 28 334 256 551 76 24 372 Corporate, sovereign, banks, SMe3 144 264 39 14 426 128 605 38 12 217 Residential mortgages 49 178 13 4 918 45 047 13 4 279 qualifying revolving retail 12 244 3 1 224 10 279 3 977 other retail 77 651 21 7 765 72 620 22 6 899

the Standardised approach 1 934 1 193 2 608 1 248 Corporate, sovereign, banks, SMe3 974 <1 97 1 370 <1 130 Retail exposures 960 <1 96 1 238 <1 118

Counterparty credit riskCurrent exposure Method 3 768 1 377 3 652 1 347

Securitisation risk internal Ratings-based approach 2 048 1 205 2 354 <1 224

Equity risk Market-based Simple Risk Weight approach 10 817 3 1 082 14 213 4 1 350 listed (300% risk weighting) 1 983 1 198 2 602 <1 247 unlisted (400% risk weighting) 8 834 2 884 11 611 3 1 103

Trading market risk internal Model approach4 4 538 1 454 3 507 1 333

Operational risk 47 161 13 4 716 42 866 13 4 072 advanced Measurement approach 47 047 13 4 705 42 769 13 4 063 the Standardised approach 114 <1 11 97 <1 9

Other assets 15 220 4 1 522 11 107 3 1 055 100% risk weighting 14 143 4 1 414 11 107 3 1 055 threshold deduction items: 250% risk weighting 1 077 <1 108

Total 368 823 100 36 882 336 858 100 32 002

total MRC2 36 882 32 002 pillar 1 MRC5 29 506 26 949 pillar 2a MRC6 7 376 5 053

Total qualifying capital and reserves7 54 259 48 973

Total surplus capital over MRC8 17 377 16 971

Analysis of total surplus capital7, 8 Cet1 20 134 20 853total tier 1 18 851 20 581

total 17 377 16 9711 Nedbank Limited refers to the SA reporting entity in terms of regulation 38 (BA700) of the SA banking regulations.2 Total minimum required capital (MRC) is measured at 10,0% (9,5% in 2013) in line with SARB regulations and circular 5/2011.3 SME = Small- and medium-sized enterprises.4 TSA is immaterial (approximately 5% of trading market risk RWA), hence it has been aggregated with the IMA portion.5 Pillar 1 MRC is measured at 8% in line with SARB regulations.6 Pillar 2a MRC is measured at 2% (1,5% in 2013) in line with the phasing-in of Basel III minimum regulatory capital ratios.7 Includes unappropriated profits.8 The decrease in the surplus capital over MRC is largely due to an increase in the minimum capital ratio from 9,5% in 2013 to 10% in 2014 per Basel III transitional arrangements.


7c

Summary of regulatory qualifying capital and reserves1 Nedbank Group Nedbank Limited

Rm 2014 2013 2014 2013

Including unappropriated profitsTotal tier 1 capital 55 130 53 605 44 669 40 793Common-equity tier 1 capital 51 112 48 935 40 419 36 012ordinary share capital and premium 17 247 16 804 17 461 17 461Minority interest: ordinary shareholders 258 243 Reserves 49 204 43 243 31 860 26 340deductions2 (15 597) (11 356) (8 902) (7 789)goodwill (5 141) (5 126) (1 410) (1 410)Capitalised software development costs (3 356) (3 065) (3 105) (2 775)gross value (3 438) (3 164) (3 105) (2 775)Related deferred tax liability 82 99

excess of downturn expected-loss overprovisions (1 585) (1 216) (1 606) (1 254)impairments (3 459) (130) (725) (531)Capital requirement in respect of foreign branches (655) (328)accumulated losses3 (167)deferred tax assets, excluding temporary differences net of deferred tax liabilities (160) (130) total derivative debit valuation adjustment (34) (34)investments in the common stock of financial entities (amount above 10% threshold) (3 265) qualifying instruments held in banks or other regulated institutions (36) (36)

defined-benefit pension fund assets (2 056) (1 820) (2 056) (1 820)gross value (2 855) (2 527) (2 855) (2 527)Related deferred tax liability 799 708 799 708

Additional tier 1 capital 4 018 4 670 4 250 4 781preference share capital and premium4 2 866 3 124 2 848 3 204Hybrid debt capital instruments4 1 402 1 577 1 402 1 577Minority interest deduction (250) (31)

Tier 2 capital 9 255 8 032 9 590 8 181Subordinated-debt instruments5 9 569 8 159 9 569 8 159Minority interest deduction6 (408) (211)general allowance for credit impairments 94 84 21 22

Total qualifying capital and reserves1 64 385 61 637 54 259 48 973

Excluding unappropriated profits Common-equity tier 1 capital 48 785 45 042 38 830 32 862Total tier 1 capital 52 804 49 712 43 080 37 643Total qualifying capital and reserves 62 058 57 744 52 669 45 8241 For comprehensive ‘composition of capital’ and ‘capital instruments main features’ disclosure please refer to the group’s Pillar 3 Report.2 In terms of regulation 43(2)(e)(i)(B)(ii)(aa)(ii) disclosure is required for all exposures that are subject to TSA and are deducted from the bank’s capital and reserves. None of the group’s standardised exposures were deducted

from the bank’s capital and reserves.3 Accumulated losses relate to losses incurred by the subsidiaries of Nedbank Limited. Per guidance from SARB, this should only be a deduction at bank solo level where the bank is itself in an accumulated-loss position. This

interpretative disclosure issue was addressed in 2014.4 The decrease in preference share capital and hybrid debt capital is due to further grandfathering of old-style instruments, as per regulation 38(13), such that only 80% of these instruments now qualify as capital, whereas

90% qualified in 2013.5 Subordinated-debt instruments were impacted by further grandfathering of old-style instruments, the redemption of NED08 (R1,7bn) as well as the issuance of new-style Basel III-compliant subordinated-debt instruments.6 In terms of regulation 38(16) any surplus capital attributable to third-party and/or minority shareholders of fully consolidated subsidiaries must be derecognised as qualifying capital.

Insurance entity capital adequacySolvency ratios

TimesRegulatory

minimumTargetrange1 2014 2013

long-term insurance (Nedgroup life) 1,00 >1,5 11,2 7,3Short-term insurance (Nedgroup insurance) 1,00 >1,3 3,1 1,81 Management target range is based on the greater of regulatory and economic capital.

■ insurance underwriting activities are predominantly undertaken by Nedbank insurance, a division of the Nedbank Wealth Cluster. ■ insurance risk consumes only 0,9% (2013: 1,6%) of the group economic capital requirement. ■ the insurance businesses are on track with their Solvency assessment and Management (SaM) implementation through a proactive approach,

which has been embedded in risk management frameworks, strategic initiatives and system enhancements. � these requirements are already a core part of our business-as-usual (Bau) processes and reporting. � the approach taken by the businesses is to ensure strategic alignment of SaM by using risk management in the business decisionmaking

framework and business planning processes. � this is evident in a detailed own Risk and Solvency assessment process that is being embedded in the existing reporting structures.

8c


eCoNoMiC Capital adequaCyStrong Nedbank Group economic capital adequacy1 and ICAAP maintained

Required economiccapital

Available financialresources

2013 2014

Available financialresources

Minimum requirement

35 939

Tier A2

51 832 Minimum

requirement 41 448

Tier A2

53 903

Tier B3

9 737Tier B3

7 701Surplus20 000

59 533

63 640

Surplus18 047

10% bu�er4 4 145

10% bu�er4 3 594

Required economiccapital

151%140%

Rm

Available financial resources (AFR):Economic capital

1 Including unappropriated profits.2 Tier A = CET1-type regulatory capital.3 Tier B = Includes Basel II perpetual preference shares and hybrid debt subject to grandfathering under Basel III and new-style Basel III-compliant additional tier 1 and tier 2 capital instruments.4 10% buffer determined in accordance with the group’s comprehensive stress testing and Internal Capital Adequacy Assessment Process (ICAAP).

■ economic capital is the group’s comprehensive internal measurement of risk and related capital requirements, and forms the basis of the group’s iCaap and allocation of risk-based capital to the business clusters.

■ Nedbank’s iCaap confirms that both Nedbank group and Nedbank limited are well capitalised above their current ‘a’ or 99,93% target debt rating (solvency standard) in terms of the group’s proprietary economic capital methodology.

� Nedbank group’s iCaap reflects a surplus aFR of R18,0bn at 2014 (2013: R20,0bn) after a 10% capital buffer is added. this is determined in accordance with the group’s comprehensive Stress and Scenario testing Framework, to the minimum required economic capital. the decrease in surplus aFR is mainly as a result of the acquisition of a stake in eti resulting in a R2,3bn capital impairment, while economic capital increased year on year.

� Nedbank limited’s iCaap reflects a surplus aFR of R16,4bn at 2014 (2013: R12,5bn) after a 10% capital buffer is added as in the case of the group. the significant increase in aFR was driven by organic earnings growth as well as the new tier B capital issuances. the acquisition of the stake in eti had been made by the group, therefore Nedbank limited was not impacted as above.


9c

Nedbank Group economic capital requirement versus available financial resources2014 2013

Rm Mix % Rm Mix %

Credit risk 24 003 58 21 711 60 Counterparty credit risk 153 <1 163 <1Securitisation risk 47 <1 44 <1 Transfer risk 53 <1 17 <1Market risk 9 103 22 5 659 16 trading risk 441 1 440 1 interest rate risk in the banking book 3 212 8 2 284 6 property risk 1 644 4 1 487 4 equity investment risk 2 860 7 1 332 4 Foreign currency translation risk 946 2 116 <1

Business risk 4 936 12 5 700 16 Operational risk 2 000 5 1 556 4 Insurance risk 391 1 562 2

Other assets risk 762 2 527 2

Minimum economic capital requirement 41 448 100 35 939 100

add: Stressed-tested capital buffer (10%) 4 145 3 594

Total economic capital requirement 45 593 39 533

Available financial resources 63 640 100 59 533 100 tier a capital 53 903 85 51 832 87 tier B capital 9 737 15 7 701 13

Total surplus AFR 18 047 20 000

■ Nedbank group’s total economic capital requirement (including a 10% stress-tested buffer) increased by R6,1bn from 2013 mainly due to: � an increase in credit economic capital that was largely driven by strong asset growth in some of the wholesale portfolios, in particular the

commercial real estate, investment banking and corporate lending portfolios. the overall credit capitalisation rate [percentage of exposure at default (ead)] increased marginally from 2,8% to 2,9%.

� a R1,5bn increase in investment risk economic capital, mainly as a result of the acquisition of an approximate 20% stake in eti increasing exposure by R6,2bn, and a 36,6% stake in Banco Único increasing exposure by R286m.

� a R928m increase in iRRBB economic capital, mainly as a result of increases in the market yield curves used to derive interest rate paths. the volatilities used to derive the interest rate paths remained unchanged, while Nii sensitivity increased marginally year on year.

� an R830m increase in foreign currency translation (FCt) risk economic capital, mainly as a result of the acquisition of an approximate 20% stake in eti and a 36,6% stake in Banco Único, increasing the group’s exposure to foreign-currency-sensitive capital and earnings.

� a R444m increase in operational risk economic capital, mainly as a result of updated aMa scenarios as well as the incorporation of more recent internal loss data.

� the increases were partially offset by a R764m decrease in business risk economic capital due to the annual update of business risk parameters in line with Nedbank’s approved economic capital policy that incorporates more recent earnings data and revised forecasts.

� tier a aFR increased by R2,1bn from 2013 to 2014 driven by organic earnings growth, offset by the acquisition of a stake in eti resulting in a R2,4bn capital impairment.

� tier B aFR increased by R2,0bn largely as a result of the issuance of R2,5bn additional Basel iii new-style tier 2 subordinated debt, partially offset by further grandfathering of preference shares and hybrid debt instruments.

� the total increase in aFR was below the increase in minimum economic capital requirement from 2013 to 2014, largely as a result of the inorganic acquisition of eti resulting in the total aFR surplus over the total economic capital requirement decreasing from R20,0bn to R18,0bn.

10c


Risk-based capital allocation to the business clusters1

Nedbank Group Nedbank Capital Nedbank Corporate Nedbank RetailNedbank Business

Banking Nedbank Wealth Rest of Africa Division2 Shared Services2 Central Management2

Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Credit risk 23 187 21 312 2 458 1 914 4 957 4 224 11 255 11 150 2 391 2 200 521 562 1 526 1 154 79 108 Market risks 6 804 5 307 1 219 1 163 760 542 1 504 1 215 613 448 198 186 734 170 1 776 1 583 trading risk 436 440 412 416 2 2 22 22 iRRBB risk 2 739 2 005 132 115 220 135 1 441 1 131 609 443 86 53 126 70 125 58 property risk 1 591 1 498 58 79 4 5 7 8 44 40 1 478 1 366 investment risk 1 724 1 269 583 586 539 406 5 5 48 93 376 22 173 157 Foreign currency translation risk 314 95 92 46 1 1 55 30 166 16 2

Business risk 4 777 5 434 950 956 907 889 1 504 2 458 598 617 697 405 121 109 Operational risk 2 042 1 576 355 300 494 438 595 402 253 213 223 118 122 105 Insurance risk 373 405 373 405

Other assets risk 616 515 18 23 83 82 171 147 9 8 54 56 26 25 255 174

Minimum economic capital requirement 37 799 34 549 5 000 4 356 7 201 6 175 15 029 15 372 3 864 3 486 2 066 1 732 2 529 1 563 2 110 1 865 intangible assets3 3 266 2 990 294 341 323 383 1 355 1 119 169 133 452 494 126 25 547 495 excess of downturn expected loss over provisions 860 535 43 (31) 35 (15) 798 563 67 75 12 10 1 1 (96) (68) goodwill 5 137 5 079 5 137 5 079 excess of Cet1 over 11% of total RWa 3 752 3 107 3 752 3 107

allocated buffer3,4 12 492 10 327 1 554 1 197 3 047 1 971 4 927 4 849 1 356 1 086 300 251 893 409 415 564

Total capital allocated 63 306 56 587 6 891 5 863 10 606 8 514 22 109 21 903 5 456 4 780 2 830 2 487 3 549 1 998 2 561 2 292 9 304 8 750

Economic profit 2 112 2 114 1 198 963 1 167 1 138 (48) (308) 358 308 660 577 (122) (87) (492) (40) (609) (437)1 Summary of average year-to-date capital allocation at 2014 versus 2013, using average year-to-date capital consumption.2 Disclosed separately from previous disclosure of the ‘Central Management, including Rest of Africa’ Cluster. 3 Restatement of 2013 comparatives in order to align to average year-to-date capital versus point-in-time previously reported.4 The allocated capital buffer aligns the total capital allocated to business clusters and central functions with the ordinary shareholders’ equity (OSE) of the group (that determines ROE), limited to an allocated 11% CET1 regulatory

capitalisation rate at group level [ie difference between the 11% ratio and actual group CET1 (2014: 11,6%) is considered ‘strategic’ and held at the centre and not allocated to business clusters for performance measurement].

■ in addition to the risk-based economic capital allocation in place across Nedbank for several years now, the following other appropriate risk-based economics are embedded bankwide:

� Funds transfer pricing. � liquidity premiums. � Risk-adjusted performance measurement. � Risk appetite. � Risk strategy.

■ all of the above are integrated into the group’s and each major business unit’s strategy and business plans, as well as management’s performance scorecards and remuneration. Furthermore, there is a healthy qualitative overlay of experience, substance over form and common sense applied.

Capital allocation for Nedbank’s Pan-African banking network ■ Building a pan-african banking network is one of Nedbank’s five key strategic focus areas. the risk appetite capacity for investing in the Rest of

africa has been determined, incorporating: � Nedbank group’s targeted internal capital adequacy range for its Cet1 capital ratio of 10,5% to 12,5%. � phased increase of the level of risk appetite for the Rest of africa, represented by an increasing level of the group’s capital reserves invested in

the Rest of africa of 10% to 15% over the period through to 2020. Following the acquisition of an approximate 20% stake in eti and a 36,6% stake in Banco Único, the proportion of the group’s capital reserves invested in Rest of africa has increased to greater than 10% as at 31 december 2014.

CoSt oF equity ■ Nedbank group revised its cost of equity (Coe) to 13,5% in 2014 (2013: 13,0%) following a review of the Coe components (ie the risk-free rate,

market beta and equity risk premium), based on the Capital asset pricing Model and in consideration of the approach followed by the group’s parent company (old Mutual plc), average investment analysts’ consensus and management judgement.


11c

Risk-based capital allocation to the business clusters1

Nedbank Group Nedbank Capital Nedbank Corporate Nedbank RetailNedbank Business

Banking Nedbank Wealth Rest of Africa Division2 Shared Services2 Central Management2

Rm 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Credit risk 23 187 21 312 2 458 1 914 4 957 4 224 11 255 11 150 2 391 2 200 521 562 1 526 1 154 79 108 Market risks 6 804 5 307 1 219 1 163 760 542 1 504 1 215 613 448 198 186 734 170 1 776 1 583 trading risk 436 440 412 416 2 2 22 22 iRRBB risk 2 739 2 005 132 115 220 135 1 441 1 131 609 443 86 53 126 70 125 58 property risk 1 591 1 498 58 79 4 5 7 8 44 40 1 478 1 366 investment risk 1 724 1 269 583 586 539 406 5 5 48 93 376 22 173 157 Foreign currency translation risk 314 95 92 46 1 1 55 30 166 16 2

Business risk 4 777 5 434 950 956 907 889 1 504 2 458 598 617 697 405 121 109 Operational risk 2 042 1 576 355 300 494 438 595 402 253 213 223 118 122 105 Insurance risk 373 405 373 405

Other assets risk 616 515 18 23 83 82 171 147 9 8 54 56 26 25 255 174

Minimum economic capital requirement 37 799 34 549 5 000 4 356 7 201 6 175 15 029 15 372 3 864 3 486 2 066 1 732 2 529 1 563 2 110 1 865 intangible assets3 3 266 2 990 294 341 323 383 1 355 1 119 169 133 452 494 126 25 547 495 excess of downturn expected loss over provisions 860 535 43 (31) 35 (15) 798 563 67 75 12 10 1 1 (96) (68) goodwill 5 137 5 079 5 137 5 079 excess of Cet1 over 11% of total RWa 3 752 3 107 3 752 3 107

allocated buffer3,4 12 492 10 327 1 554 1 197 3 047 1 971 4 927 4 849 1 356 1 086 300 251 893 409 415 564

Total capital allocated 63 306 56 587 6 891 5 863 10 606 8 514 22 109 21 903 5 456 4 780 2 830 2 487 3 549 1 998 2 561 2 292 9 304 8 750

Economic profit 2 112 2 114 1 198 963 1 167 1 138 (48) (308) 358 308 660 577 (122) (87) (492) (40) (609) (437)1 Summary of average year-to-date capital allocation at 2014 versus 2013, using average year-to-date capital consumption.2 Disclosed separately from previous disclosure of the ‘Central Management, including Rest of Africa’ Cluster. 3 Restatement of 2013 comparatives in order to align to average year-to-date capital versus point-in-time previously reported.4 The allocated capital buffer aligns the total capital allocated to business clusters and central functions with the ordinary shareholders’ equity (OSE) of the group (that determines ROE), limited to an allocated 11% CET1 regulatory

capitalisation rate at group level [ie difference between the 11% ratio and actual group CET1 (2014: 11,6%) is considered ‘strategic’ and held at the centre and not allocated to business clusters for performance measurement].

StReSS aNd SCeNaRio teStiNg ■ Nedbank group has a comprehensive Stress and Scenario testing Framework that is used, inter alia, to stress its base case projections in order to

assess the adequacy of Nedbank group’s and Nedbank limited’s capital levels, buffers and target ratios. the framework is an integral part of the group’s iCaap under Basel iii, strategy and business plans.

■ the group’s stress and scenario testing recognises and estimates the potential volatility of the capital requirements and base case (expected) three-year business plan projections, including the key assumptions and sensitivities contained therein, which themselves are subject to fluctuation.

■ Stress and scenario testing is performed and reported quarterly, or more regularly if required. Macroeconomic scenarios of different severities are considered, ranging from a mild stress to severe inflationary and severe deflationary scenarios. the most plausible scenario considered is a low-rate scenario that depicts a continuation of the current macroeconomic environment, but with significantly lower real gdp growth, a stronger rand and lower global oil and food prices. the stronger rand under this scenario would be due to the united States (uS) Federal Reserve delaying the normalisation of uS interest rates. Credit growth would be poor but it is combined with improved inflation. the low interest rates have a negative impact on endowment Nii, while lower credit growth impacts Nii and NiR negatively. impairments increase as a result of the deteriorating economic environment.

■ the latest stress and scenario testing results performed in November 2014, using the 2015 to 2017 business plan as the base, confirm that the capital levels and capital buffers, for both regulatory capital and economic capital (Nedbank group’s internal capital assessment), remain appropriate.

■ in 2014 the Bank of england conducted the first concurrent stress test of the uK banking system, covering eight major uK banks and building societies, the results of which were published on 16 december 2014. the same stress scenario was applied to Nedbank group’s 2014–2016 business plans, resulting in a favourable comparison with uK banks.

■ in addition to the quarterly stress testing process, a comprehensive set of topical scenarios are evaluated and presented during the annual iCaap. the ’top of mind’ scenarios considered in the 2014 iCaap, in addition to the macroeconomic stress scenarios, include:

� the impact of a further Sa credit rating downgrade. � the impact of growth in unsecured lending on Nedbank group’s secured and unsecured lending portfolios. � Stress testing of Nedbank group’s Rest of africa investments. � the impact of higher interest rates on consumers as well as the impact of labour unrest in the mining sector.

■ in conclusion, the stress and scenario testing results confirm that the capital levels and capital buffers, both current and projected to 2017, remain appropriate. Nedbank group is strongly capitalised relative to its business activities, strategy, risk appetite, risk profile and the external environment in which the group operates.

12c


exteRNal CRedit RatiNgS ■ Nedbank engages three credit rating agencies, whose ratings are summarised below:

� in June 2014 Standard & poor’s adjusted Nedbank’s long- and short-term counterparty credit ratings downwards, while Fitch Ratings adjusted its outlook from stable to negative, following similar action taken in respect of Sa’s sovereign rating, and in line with the ratings of other Sa banks.

— Rating agencies believe that the operating environment for banks in Sa has deteriorated on the back of lower economic growth. — lower growth is mainly a consequence of the prolonged strike in the platinum sector, electricity supply constraints and weak manufacturing

performance. � on 19 august 2014 Nedbank noted Moody’s rating actions in respect of Sa banks, including the ratings in respect of Nedbank limited,

whereby Moody’s downgraded Nedbank’s local currency and national scale ratings by one notch to Baa1 (from a3) and aa3.za (from aa2.za) respectively. Moody’s further downgraded Nedbank’s long-term deposit and senior-debt ratings during November 2014 to Baa2 (stable) following similar rating action in respect of the Sa sovereign rating. the rating agency cited the Sa government’s weakening credit profile and the banks’ high sovereign exposure in the form of government debt securities as the main drivers of the rating action.

� these actions reference Moody’s assessment of the industry as a whole and were not specific to Nedbank. Furthermore, these actions are in line with international rating agency actions taken in respect of a number of banks in recent years as Basel iii resolution regimes have been implemented, as central banks no longer bail out all creditors at the expense of the taxpayer, and instead bail in senior-debt holders.

� Moody’s noted the broad resilience demonstrated by Sa banks in the past, including the management of adverse economic environments, and solidity of key system financial metrics, including healthy buffers that will facilitate the weathering of strong headwinds.

Standard & Poor’s ratingsNedbank Limited

December 2014Counterparty credit risk rating BBB-/A-3outlook – counterparty credit risk StableSa national scale ZaAA/ZaA-1

Fitch ratingsNedbank Group Limited

December 2014Nedbank Limited

December 2014Sovereign rating SA

December 2014Support 2 2Foreign currency long-term BBB BBB BBBShort-term F3 F3 F3outlook Negative Negative Negative

Local currency long-term BBB BBB BBB+outlook Negative Negative Negative

National scalelong-term AA(zaf) AA(zaf)Short-term F1+(zaf) F1+(zaf)outlook Stable Stable

Viability rating bbb bbbCountry ceiling1 A-1 Fitch country ceiling is an expression of the maximum limit for the foreign-currency issuer rating of most, but not all, issuers in a given country.

Moody’s Investor Service ratingsNedbank Limited

November 2014Sovereign rating SA

November 2014

Foreign currency deposit ratingslong-term Baa2 Baa2Short-term P-2 P-2outlook Stable Stable

Local currency deposit ratingslong-term Baa2 Baa2Short-term P-2outlook Stable Stable

National scalelong-term deposits A1.zaShort-term deposits P-1.za

Bank financial-strength rating C-outlook Stable

■ external rating agencies still view the Sa banking sector as resilient, with stable core earnings, sophisticated risk management and good levels of capitalisation and liquidity.

� Nedbank is regarded as a strong franchise with sound credit metrics, risk and balance sheet management, and good financial performance over several years.

� Rating agencies recognise the improvement in Nedbank’s retail banking franchise in terms of client penetration, transactional banking market share, increasing long-term funding ratio and earnings-generating capabilities.


13c

LEVERAGE

■ the leverage ratio is intended by the Basel Committee on Banking Supervision (Basel Committee) to serve as a simple, transparent, non-risk-based leverage ratio to supplement the Basel iii risk-based capital requirements in order to help avoid the buildup of excessive leverage and to capture both on- and off-balance-sheet exposure.

■ Sa banks, including Nedbank, compare favourably to most international banks on leverage. � Sa’s banking system generally has low leverage. � as a consequence, deleveraging is not a factor in Sa.

■ Nedbank group’s gearing under Basel iii, which includes off-balance-sheet exposure and is based on the current regulations, is 17,2 times (or 5,8%) at 2014 (2013: 16,8 times or 6,0%) against an internal risk appetite target of less than 20 times (or >5%), and well below the Basel iii limit, in accordance with the revised Sa regulations of 25 times (or >4%), which is more prudent than Basel iii at 33,3 times (or >3%). the slight decline in the leverage position is largely as a result of the acquisition of the eti stake and its associated capital and impairment.

■ the Basel iii leverage ratio differs from the international Financial Reporting Standards (iFRS) accounting or the financial leverage ratio in both the capital measure and the exposure measure:

� in terms of the capital measure Basel iii currently utilises total tier 1 qualifying regulatory capital, whereas the iFRS accounting leverage ratio utilises only ordinary shareholders’ equity.

� in terms of the exposure measure the main difference between Basel iii and iFRS accounting is the inclusion of off-balance-sheet exposure in the Basel iii measurement.

� Nedbank group’s gearing or daily average iFRS accounting-based financial leverage ratio is 12,4 times (or 8,1%) at 2014 (2013: 12,7 times or 7,9%).

■ the revised Basel iii leverage Ratio Framework and disclosure requirements published by the Basel Committee are effective from 1 January 2015. the 2014 pro forma leverage ratio based on these recent changes declines to 15,1 times (or 6,6%). the lower leverage position under the revised framework is due to the netting of securities financing transactions (eg where banks act as an agent) and less conservative treatment of off-balance-sheet exposure.

14c

LIQUIDITY RISK AND FUNDING

Summary of Nedbank Group liquidity risk and funding profile2014 2013

Total sources of quick liquidity (Rm) 121 074 107 252Surplus statutory liquid assets (Rm) 36 990 27 965Statutory liquid assets and cash reserves (ie SARB prudential minimum) (Rm) 45 637 41 734Other sources of quick liquidity1 (Rm) 38 447 37 553Total sources of quick liquidity as a % of total assets (%) 15,0 14,3

Long-term funding ratio (three-month average) (%) 25,4 26,2Retail Savings Bond2 (Rm) 11 850 9 638Senior unsecured debt (Rm) 22 478 20 850Total capital market issuance (Rm) 35 638 33 268

Reliance on negotiable certificates of deposit3 (%) 10,8 14,5Reliance on foreign funding3 (%) 4,6 2,3Loan-to-deposit ratio (%) 93,8 96,1Basel III pro forma liquidity ratios Liquidity coverage ratio (LCR) (effective date – 2015 to 2019)4 including targeted access to the committed liquidity facility (CLF) (%) >60 >60

Net stable funding ratio (NSFR) (effective date – 2018)5 (%) WIP6 WIP6

1 This includes corporate bonds, listed equities and other marketable securities.2 Nedbank has both Retail Savings Bonds and Green Retail Savings Bonds with tenures of two, three and five years. The proceeds of the Green Retail Savings Bonds are earmarked for renewable-energy projects, while the proceeds of

ordinary Retail Savings Bonds are applied to the general funding pool.3 As a % of total deposits.4 A 60% minimum LCR is required from 2015, increasing 10% per annum to 100% by 2019.5 The Basel Committee released its final version of the NSFR in October 2014.6 WIP = work in progress. The SA Banks are working with National Treasury and the SARB to address the structural challenges of complying with the NSFR before the effective date of 1 January 2018.

■ Nedbank Group remains well funded with a strong liquidity position, underpinned by a significant quantum of long-term funding, an appropriately sized surplus liquid-asset buffer, compliance with the minimum LCR regulatory requirements, a strong loan-to-deposit ratio consistently below 100% and a low reliance on interbank and foreign-currency funding.

■ Based on the final revisions announced by the Basel Committee in January 2013, the LCR will be phased-in starting at 60% on 1 January 2015 and increasing by 10% each year to 100% on 1 January 2019.

� In addition, SARB reconfirmed in guidance note 08/2014, dated 9 December 2014, that it will provide CLFs to banks for up to 40% of the high-quality liquid-asset (HQLA) requirement in order to address the general shortage of qualifying level 2 assets in the SA financial system.

� Based on internal risk modelling, Nedbank will target an LCR operational level above the minimum regulatory requirement to absorb normal seasonal volatility inherent in the domestic financial system and consequently in the LCR.

■ In January 2014, the Basel Committee announced the much-anticipated proposed revisions to the NSFR as originally included in the December 2010 Basel III accord.

� The revisions more closely aligned the NSFR with the LCR and represented a significant softening of the ratio from the original proposal. � The Basel Committee then published a more finalised NSFR standard in October 2014. While the gap to full compliance with the NSFR has

substantially decreased, full SA banking industry compliance remains challenging given the structurally small retail deposit base, compared with developed economies, which has resulted in a proportionally higher wholesale funding reliance for SA banks. Instruments such as covered bonds are also not currently available in SA.

� Consequently, Nedbank will continue to work closely with SARB, its peer group and the National Treasury in addressing the structural challenge ahead of the NSFR compliance date, with implementation currently planned for 1 January 2018.

■ Nedbank’s strong funding and liquidity position is illustrated by the following: � Nedbank has maintained significant sources of quick liquidity amounting to R121,1bn, representing 15,0% of total assets.

— The statutory liquid assets and cash reserves, combined with the surplus liquid asset buffer of R37,0bn, made up of government bonds and treasury bills, increased to R82,6bn or by 18,5% in 2014 (2013: R69,7bn).

— During 2015 Nedbank will procure additional HQLAs to support balance sheet growth and the LCR phase-in from a minimum regulatory requirement of 60% in 2015 to 70% in 2016, while continuing to maintain appropriately sized surplus liquid-asset buffers to absorb seasonal volatility in the LCR.


15c

Nedbank Group significant sources of quick liquidityNEDBANK GROUP SIGNIFICANT SOURCES OF QUICK LIQUIDITY

2014

R121,1bn

74 35

12

12

26

31

%

2013

R107,3bn

75 36

14

12

27

26

Corporate bonds and listed equities

Marketable securities

Surplus liquid assets, including notes and coins

Prudential liquid assets

Cash reserves

Other bank paper and unutilised bank credit lines

Price-sensitive overnight loans

Other

� A strong funding profile has been maintained in 2014, with Nedbank recording a three-month average long-term funding ratio of 25,4% in the fourth quarter of 2014 (quarterly average 2013: 26,2%). While long-term funding ratios for the industry as a whole trended slightly lower in Q4 2014, largely driven by expectations of higher interest rates, Nedbank has maintained a slightly more conservative funding profile with a long-term funding ratio of around 1,7% higher than the industry average.

— Growth in the Nedbank Retail Savings Bonds of R2,2bn contributed positively to the longer-term funding bucket as well as the strategy of diversifying Nedbank’s funding base, bringing the total amount issued to R11,9bn.

— In addition, Nedbank successfully issued R2,3bn in senior unsecured debt in the first half of 2014, followed by R2,2bn during the second half of 2014, while R3,0bn matured during the year.

— In 2014 Nedbank also issued R2,5bn in Basel III-compliant, fully loss-absorbent subordinated tier 2 debt capital instruments, refinancing R1,7bn of old-style Basel II-compliant instruments that were redeemed.

� The loan-to-deposit ratio remains consistently below 100% and improved to 93,8% in 2014 (2013: 96,1%) as more deposits were deployed towards the procurement of HQLA as part of proactively prepositioning for LCR compliance in 2015.

� Nedbank’s foreign-currency reliance as a percentage of deposits remained small at 4,6%, despite the fact that it has increased (2013: 2,3%) as part of Nedbank’s strategy to diversify its funding sources and continue to match fund foreign advances growth.

■ The annual Internal Liquidity Adequacy Assessment Process (ILAAP) and Internal Capital Adequacy Assessment Process (ICAAP) were signed off by the board of directors through the Group Risk and Capital Management Committee (GRCMC) in July 2014 and submitted to SARB. No material issues have been raised by SARB on previous submissions.

Nedbank Group funding and liquidity profile, underpinned by competitive capital markets issuanceNEDBANK GROUP FUNDING AND LIQUIDITY PROFILE, UNDERPINNED BY COMPETITIVE CAPITAL MARKETS ISSUANCE

35,6

50,5

96,9

95,295,7

93,8

25,026,0

25,424,0

Loan-to-deposit ratio (%)

Three-month average long-term funding ratio (%)

Annual growth in deposits (Rm)

Capital market issuance (Rm)

2010 2011 2012 2013 2014

52,1

33,329,4

33,7

26,121,0

96,1

26,2

26,830,3

16c

■ Deposits grew 8,4% to R653,5bn from R603,0bn in 2013, while total funding-related liabilities grew 8,3% to R689,1bn from R636,2bn. � With 94,8% of all funding-related liabilities emanating from deposits, Nedbank continued to grow its retail and commercial banking franchise

with deposit-funding contributions from the Corporate, Business Banking, Retail and Wealth Clusters. � In addition, Nedbank continued to provide competitive and innovative transactional and investment products, with its ongoing emphasis

on meeting client needs through product, pricing and innovation. This will continue to be a key area of focus as Nedbank seeks to grow the transactional banking franchise, addressing its suboptimal market share of transactional retail and commercial deposits, which currently represents an opportunity to grow net interest income (NII) and non-interest revenue (NIR) further.

� Strong growth in current and savings accounts, fixed deposits, foreign-currency deposits and other structured products all contributed to lower funding from NCDs, which typically emanate from institutional depositors.

� Growth in Nedbank Retail Green Savings Bonds (part of fixed deposits) contributed positively to funding renewable-energy projects, lengthening and diversifying the funding profile while also supplementing growth in traditional transactional, savings and investment products.

Nedbank Group strong deposit growth and a well-diversified deposit mixNEDBANK GROUP STRONG DEPOSIT GROWTH AND A WELL-DIVERSIFIED DEPOSIT MIX

Deposits (Rbn) Contribution (%)

Current accounts

Savings accounts

Fixed deposits

Cash manage-

ment deposits

Call and term

deposits

2014

6,52,8

4,54,2

20,2

15,813,6

(17,1)

11,0% 12,2% 11,8% 7,5% 8,5% 110,7%

8,4%

20,1

10,8

39,4

6,5

9,3

13,9

653,

5Current accounts and savings accounts

Call and term deposits

Fixed deposits

Cash management deposits

Negotiable certificates of deposit

Other

603,

0

2013 Foreign currency liabilities

(19,5%)

Negotiable certificates

of deposit

15,4%

Other deposits and loan accounts

■ In 2014 Nedbank successfully tilted its funding mix away from wholesale funding through proportionally higher growth in retail deposits, capital market issuance and foreign funding. In 2015 a key focus will be to increase retail and commercial transactional deposits further as part of Nedbank’s overall deposit mix optimisation strategy.

Nedbank Group’s positively tilting deposit mixNEDBANK GROUP’S POSITIVELY TILTING DEPOSIT MIX

2014

%

2013

1843

56

28

Wholesale

Commercial

Household

Capital markets

Foreign funding

1939

95

28

R653,5bnR603,0bn

LIQUIDITY RISK AND FUNDING (continued)


17c

■ The business-as-usual liquidity mismatch of the group is presented below. The table shows the expected liquidity mismatch under normal market conditions after taking into account the behavioural attributes of stable deposits, savings and investment products and rollover assumptions associated with term deals, but excluding business-as-usual management actions. Based on client behavioural attributes, it is estimated that 94% (2013: 95%) of the amounts owed to depositors are stable.

Nedbank Group business-as-usual liquidity gap

Rm Next day 2 to 7 days8 days to 1

month 1 to 2

months 2 to 3

months 3 to 6

months6 to 12

months>12

months Total

2014Cash and cash equivalents 28 250 28 250 Other short-term securities 669 1 791 7 732 10 928 8 930 14 821 16 743 5 620 67 234 Derivative financial instruments 31 183 703 917 916 555 1 187 11 081 15 573 Government and other securities 27 177 27 177 Loans and advances 8 411 2 083 26 667 14 309 14 753 36 577 71 580 438 641 613 021

Other assets 58 058 58 058

Total assets 9 111 4 057 35 102 26 154 24 599 51 953 89 510 568 827 809 313

Total equity 70 911 70 911 Derivative financial instruments 21 132 504 658 658 407 914 12 178 15 472 Amounts owed to depositors 851 6 383 23 465 12 607 16 810 36 683 61 379 495 272 653 450 Provision and other liabilities 33 842 33 842

Long-term debt instruments 48 1 306 1 576 5 706 27 002 35 638

Total equity and liabilities 920 6 515 23 969 14 571 17 468 38 666 67 999 639 205 809 313

Net liquidity gap – 2014 8 191 (2 458) 11 133 11 583 7 131 13 287 21 511 (70 378) –

Net liquidity gap – 2013 10 004 (1 114) 8 821 5 781 6 204 13 518 24 264 (67 478) –

■ As illustrated below, Nedbank Group’s cumulative inflows exceed outflows in the next-day to one-month time bucket and beyond, highlighting the strength of Nedbank’s retail and commercial deposit franchise and the associated behavioural stability of these deposits.

Nedbank Group behavioural liquidity mismatch1

%

Nextday

2 to 7days

8 daysto 1 month

1 to 2months

2 to 3months

3 to 6 months

(0,5)

0,0

0,5

1,0

1,5

2,0

2013 2014

1 Expressed on total assets and based on maturity assumptions before rollovers and risk management.

18c

OVERVIEW ■ Overall the credit environment remained muted, with wholesale

credit demand continuing to outpace retail demand as poor employment prospects, high levels of indebtedness, increased interest rates and weak confidence levels weighed against consumers.

■ Wholesale credit demand was supported by renewable-energy projects, corporate action and increased dealflow from the Rest of Africa.

■ Nedbank gross loans and advances increased by 5,6% to R624 116m (2013: R590 828m), compared with 9,8% in 2013. Excluding low-yielding trading advances, gross banking advances growth was 7,9%, underpinned by gross new banking book payouts of R166,8bn (2013: R158,9bn).

■ Net loans and advances increased by 5,8% to R613 021m (2013: R579 372m), reflecting the improved risk profile of the portfolio.

■ The implementation of the portfolio tilt strategy over the last four years has enabled Nedbank to maintain a sound balance sheet and reduce impairments. The benefit of early action taken to reduce the Home Loans and Personal Loans portfolios is evident in the healthy risk profile of the credit portfolio.

■ The income statement impairments charge decreased to R4 506m (2013: R5 565m), reflecting prudent risk management practices across the portfolios.

■ Defaulted advances decreased by 11,2% to R15,8bn (2013: R17,9bn), sustained by improved levels of defaults in Nedbank Retail and Nedbank Capital.

■ The group credit loss ratio (CLR) decreased to 0,79% (2013: 1,06%) as a result of ongoing improvement in asset quality, prudent credit granting and collections practices together with benefits from the change in the advances mix. The group CLR is now below the through-the-cycle (TTC) target range of 0,80% to 1,20%.

■ The R200m portfolio impairment held in the Centre was increased to R350m in line with the group’s view of a protracted weak economic environment.

■ Total balance sheet impairments reduced by 3,2% to R11 095m (2013: R11 456m) with postwriteoff recoveries increasing to R941m (2013: R888m) and writeoffs and other transfers decreasing slightly to R5 808m (2013: R5 867m).

■ The group's total coverage ratio strengthened to 70,0% (2013: 64,2%), with the specific coverage ratio improving to 43,1% (2013: 42,3%) and the portfolio coverage increasing slightly to 0,70% (2013: 0,68%).

LOANS AND ADVANCES ■ Group gross banking advances growth was primarily driven by strong

performances from both Nedbank Capital and Nedbank Corporate, together contributing 46,8% of total gross banking advances.

� Banking book payouts increased by 5,0% to R166,8bn (2013: R158,9bn), supported by strong wholesale growth and offset by lower retail payouts as a result of the selective origination portfolio tilt strategy.

■ Nedbank Business Banking recorded gross loans and advances growth of 4,8% to R67 152m (2013: R64 066m) due to sustained levels of payouts and good client acquisitions, offset by slower drawdowns and early settlements.

■ Nedbank Corporate gross loans and advances increased by 13,9% to R200 697m (2013: R176 185m), which was driven by strong commercial-mortgage growth due to drawdowns of deals booked in 2013 as well as new growth.

■ Nedbank Capital gross loans and advances decreased by 3,7% to R105 942m (2013: R110 046m).

� Gross banking advances increased by 8,8% to R78 937m (2013: R72 563m), as a result of good pipeline conversion rates across sector–focused businesses.

� Trading advances, the lower yielding component of the advances book, decreased by 28,0% to R27 005m (2013: R37 483m), driven by a decrease in foreign-currency placements and deposits placed under reverse repurchase agreements.

■ Nedbank Retail loans and advances growth was led by the selective origination portfolio tilt strategy.

� Home Loans gross loans and advances decreased by 0,5% to R80 885m (2013: R81 265m).

� MFC (vehicle finance) gross loans and advances increased by 12,4% to R73 687m (2013: R65 585m).

� As planned Personal Loans gross loans and advances decreased to R17 077m (2013: R20 122m) and growth of new advances remains below current industry levels.

� Card gross loans and advances increased by 17,7% to R13 357m (2013: R11 349m) as a result of higher spending in Greenbacks, American Express, Visa and MasterCard payouts.

CREDIT RISK


19c

Summary of loans and advances by cluster and business lineGross Balance sheet impairments Net

2014 Rm Change % Rm Mix % Rm Mix % Change %

Nedbank Capital 105 942 (3,7) (341) 3,1 105 601 17,2 (3,6)Trading book 27 005 (28,0) 27 005 4,4 (28,0)Banking book 78 937 8,8 (341) 3,1 78 596 12,8 9,1

Nedbank Corporate 200 697 13,9 (1 140) 10,3 199 557 32,6 13,9 Corporate Banking 87 562 7,5 (484) 4,4 87 078 14,2 7,4 Property Finance 109 790 17,8 (656) 5,9 109 134 17,8 17,8 Other 3 345 >100,0 3 345 0,6 >100,0

Total Nedbank RBB1 277 815 3,8 (8 933) 80,5 268 882 43,9 4,1 Nedbank Business Banking 67 152 4,8 (1 333) 12,0 65 819 10,7 4,8 Nedbank Retail 210 663 3,4 (7 600) 68,5 203 063 33,2 3,9 Home Loans2 80 885 (0,5) (1 767) 15,9 79 118 12,9 (0,1)MFC 73 687 12,4 (1 981) 17,9 71 706 11,7 13,0 Consumer Banking 18 079 (14,1) (2 523) 22,7 15 556 2,5 (15,3)Personal Loans 17 077 (15,1) (2 377) 21,4 14 700 2,4 (16,4)Client Engagement 975 8,3 (146) 1,3 829 0,1 8,8 Other 27 (15,6) 27 <0,1 (15,6)

Relationship Banking3 24 646 0,9 (367) 3,3 24 279 4,0 1,4 Card 13 357 17,7 (962) 8,7 12 395 2,0 18,4 Other4 9 (10,0) 9 <0,1 (10,0)

Nedbank Wealth 24 987 12,3 (168) 1,5 24 819 4,0 12,4Rest of Africa Division 14 253 (4,3) (180) 1,6 14 073 2,3 (4,3)Centre 422 >100,0 (333) 3,0 89 <0,1 >100,0Nedbank Group 624 116 5,6 (11 095) 100,0 613 021 100,0 5,8 Trading book 27 005 (28,0) 27 005 4,4 (28,0)Banking book 597 111 7,9 (11 095) 100,0 586 016 95,6 8,1

2013Nedbank Capital 110 046 32,7 (497) 4,3 109 549 18,9 32,8 Trading book 37 483 25,9 37 483 6,5 25,9 Banking book 72 563 25,9 (497) 4,3 72 066 12,4 36,7

Nedbank Corporate 176 185 7,7 (911) 7,9 175 274 30,3 7,7 Corporate Banking 81 428 5,4 (372) 3,2 81 056 14,0 5,3 Property Finance 93 173 10,8 (539) 4,7 92 634 16,0 11,0 Other 1 584 (31,3) 1 584 0,3 (31,4)

Total Nedbank RBB1 267 756 3,0 (9 536) 83,3 258 220 44,5 3,0 Nedbank Business Banking 64 066 4,4 (1 281) 11,2 62 785 10,8 4,4 Nedbank Retail 203 690 2,6 (8 255) 72,1 195 435 33,7 2,5 Home Loans2 81 265 (3,9) (2 079) 18,2 79 186 13,7 (3,5)MFC 65 585 14,8 (2 120) 18,5 63 465 10,9 14,8 Consumer Banking 21 054 (9,1) (2 685) 23,4 18 369 3,2 (11,9)Personal Loans 20 122 (9,4) (2 547) 22,2 17 575 3,0 (12,3)Client Engagement 900 (2,1) (138) 1,2 762 0,1 (1,6)Other 32 14,8 32 <0,1 17,0

Relationship Banking3 24 427 2,9 (487) 4,3 23 940 4,1 3,3 Card 11 349 14,4 (884) 7,7 10 465 1,8 13,5 Other4 10 (58,3) 10 <0,1 (57,4)

Nedbank Wealth 22 250 11,4 (168) 1,5 22 082 3,8 11,2 Rest of Africa Division 14 887 17,5 (187) 1,6 14 700 2,5 27,4Centre (296) (71,8) (157) 1,4 (453) (0,1) (62,4)Nedbank Group 590 828 9,8 (11 456) 100,0 579 372 100,0 9,9 Trading book 37 483 25,9 37 483 6,5 25,9Banking book 553 345 8,9 (11 456) 100,0 541 889 93,5 8,9

1 RBB = Retail and Business Banking.2 Home Loans represents a specific business unit within Nedbank Retail. This excludes Home Loans in the Nedbank Retail Relationship Banking business unit.3 Nedbank Retail Relationship Banking includes Small Business Services and Personal Relationship Banking.4 The other line item includes Retail Central Unit, Human Resources, Risk, Prospects and Strategy, Finance and Divisional Management.

20c

Summary of loans and advances by product

Nedbank Group

2010 2011 2012 2013 2014

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix%

Change%

Residential mortgages 145 895 29,9 139 923 27,4 136 301 25,3 136 156 23,0 137 449 22,0 0,9 Commercial mortgages 86 100 17,6 92 720 18,2 97 732 18,2 106 325 18,0 123 652 19,8 16,3 Leases and instalment sales 67 880 13,9 71 169 13,9 75 764 14,1 85 038 14,4 94 237 15,1 10,8 Card 7 910 1,6 8 666 1,7 10 019 1,9 11 441 1,9 13 404 2,2 17,2 Overdrafts 13 307 2,7 13 152 2,6 13 694 2,5 15 048 2,5 16 141 2,6 7,3 Properties in possession 662 0,1 619 0,1 574 0,1 772 0,1 596 0,1 (22,8)Term loans 74 605 15,3 77 980 15,3 88 354 16,5 97 528 16,5 106 175 17,0 8,9

Personal loans 13 001 2,7 17 847 3,5 22 969 4,3 21 145 3,6 18 346 2,9 (13,2)Other term loans1 61 604 12,6 60 133 11,8 65 385 12,2 76 383 12,9 87 829 14,1 15,0

Overnight loans 12 552 2,6 19 104 3,7 18 341 3,4 17 927 3,0 21 638 3,5 20,7 Other loans to clients1 44 851 9,2 52 461 10,3 51 482 9,6 70 976 12,0 69 161 11,1 (2,6)

Foreign correspondents 6 716 1,4 9 364 1,8 5 760 1,1 12 658 2,1 12 512 2,0 (1,2)Remittances in transit 108 <0,1 195 <0,1 193 <0,1 237 <0,1 195 <0,1 (17,7)Other loans 38 027 7,8 42 902 8,4 45 529 8,5 58 081 9,8 56 454 9,0 (2,8)

Preference shares and debentures 20 499 4,2 17 960 3,5 16 948 3,1 18 984 3,2 18 098 2,9 (4,7)Factoring accounts 3 202 0,7 3 822 0,7 4 461 0,8 4 796 0,8 4 986 0,8 4,0 Deposits placed under reverse repurchase agreements 10 849 2,2 12 911 2,5 24 338 4,5 25 796 4,4 18 291 2,9 (29,1)

Trade, other bills and bankers’ acceptances 140 <0,1 33 <0,1 28 <0,1 41 <0,1 288 <0,1 >100

Gross loans and advances 488 452 100,0 510 520 100,0 538 036 100,0 590 828 100,0 624 116 100,0 5,6

Total impairments (11 226) (11 497) (10 870) (11 456) (11 095) (3,2)

Net loans and advances 477 226 499 023 527 166 579 372 613 021 5,8 1 An additional view of other term loans and other loans to clients is provided in the summary of other loans by cluster.

Summary of other loans by clusterOther term loans Other loans to clients

2014 2013 2014 2013

Change%

GrossRm

GrossRm

Change%

GrossRm

GrossRm

Nedbank Capital 35,4 20 293 14 992 (1,5) 55 545 56 408 Investment Banking 35,5 20 236 14 939 3,9 45 348 43 660 Global Markets (54,4) 3 144 6 896 Other 7,5 57 53 20,5 7 053 5 852

Nedbank Corporate 9,8 64 108 58 388 29,3 2 068 1 600 Corporate Banking 8,0 56 477 52 298 27,7 2 041 1 598 Property Finance 25,3 7 631 6 090 Other >100,0 27 2

Total Nedbank RBB1 9,0 1 921 1 762 8,4 5 215 4 811Nedbank Wealth 25,9 982 780 23,3 3 524 2 858 Rest of Africa Division 14,5 528 461 (58,5) 1 940 4 680

Centre (3) 40,4 869 619

Nedbank Group 15,0 87 829 76 383 (2,6) 69 161 70 976 1 RBB = Retail and Business Banking.

CREDIT RISK (continued)


21c

Summary of loans and advances by product

Nedbank Group

2010 2011 2012 2013 2014

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix %

GrossRm

Mix%

Change%

Residential mortgages 145 895 29,9 139 923 27,4 136 301 25,3 136 156 23,0 137 449 22,0 0,9 Commercial mortgages 86 100 17,6 92 720 18,2 97 732 18,2 106 325 18,0 123 652 19,8 16,3 Leases and instalment sales 67 880 13,9 71 169 13,9 75 764 14,1 85 038 14,4 94 237 15,1 10,8 Card 7 910 1,6 8 666 1,7 10 019 1,9 11 441 1,9 13 404 2,2 17,2 Overdrafts 13 307 2,7 13 152 2,6 13 694 2,5 15 048 2,5 16 141 2,6 7,3 Properties in possession 662 0,1 619 0,1 574 0,1 772 0,1 596 0,1 (22,8)Term loans 74 605 15,3 77 980 15,3 88 354 16,5 97 528 16,5 106 175 17,0 8,9

Personal loans 13 001 2,7 17 847 3,5 22 969 4,3 21 145 3,6 18 346 2,9 (13,2)Other term loans1 61 604 12,6 60 133 11,8 65 385 12,2 76 383 12,9 87 829 14,1 15,0

Overnight loans 12 552 2,6 19 104 3,7 18 341 3,4 17 927 3,0 21 638 3,5 20,7 Other loans to clients1 44 851 9,2 52 461 10,3 51 482 9,6 70 976 12,0 69 161 11,1 (2,6)

Foreign correspondents 6 716 1,4 9 364 1,8 5 760 1,1 12 658 2,1 12 512 2,0 (1,2)Remittances in transit 108 <0,1 195 <0,1 193 <0,1 237 <0,1 195 <0,1 (17,7)Other loans 38 027 7,8 42 902 8,4 45 529 8,5 58 081 9,8 56 454 9,0 (2,8)

Preference shares and debentures 20 499 4,2 17 960 3,5 16 948 3,1 18 984 3,2 18 098 2,9 (4,7)Factoring accounts 3 202 0,7 3 822 0,7 4 461 0,8 4 796 0,8 4 986 0,8 4,0 Deposits placed under reverse repurchase agreements 10 849 2,2 12 911 2,5 24 338 4,5 25 796 4,4 18 291 2,9 (29,1)

Trade, other bills and bankers’ acceptances 140 <0,1 33 <0,1 28 <0,1 41 <0,1 288 <0,1 >100

Gross loans and advances 488 452 100,0 510 520 100,0 538 036 100,0 590 828 100,0 624 116 100,0 5,6

Total impairments (11 226) (11 497) (10 870) (11 456) (11 095) (3,2)

Net loans and advances 477 226 499 023 527 166 579 372 613 021 5,8 1 An additional view of other term loans and other loans to clients is provided in the summary of other loans by cluster.

Summary of other loans by clusterOther term loans Other loans to clients

2014 2013 2014 2013

Change%

GrossRm

GrossRm

Change%

GrossRm

GrossRm

Nedbank Capital 35,4 20 293 14 992 (1,5) 55 545 56 408 Investment Banking 35,5 20 236 14 939 3,9 45 348 43 660 Global Markets (54,4) 3 144 6 896 Other 7,5 57 53 20,5 7 053 5 852

Nedbank Corporate 9,8 64 108 58 388 29,3 2 068 1 600 Corporate Banking 8,0 56 477 52 298 27,7 2 041 1 598 Property Finance 25,3 7 631 6 090 Other >100,0 27 2

Total Nedbank RBB1 9,0 1 921 1 762 8,4 5 215 4 811Nedbank Wealth 25,9 982 780 23,3 3 524 2 858 Rest of Africa Division 14,5 528 461 (58,5) 1 940 4 680

Centre (3) 40,4 869 619

Nedbank Group 15,0 87 829 76 383 (2,6) 69 161 70 976 1 RBB = Retail and Business Banking.

22c

Basel III balance sheet credit exposureReconciliation of gross loans and advances to Basel III balance sheet credit exposure by business unit and asset class

NedbankCapital1

Rm

NedbankCorporate1

Rm

Total Nedbank

RBB Rm

NedbankBusiness Banking

Rm

NedbankRetail

Rm

NedbankWealth

Rm

Rest of Africa Division

RmCentre

Rm

Nedbank Group2014

Nedbank Group2013

RmMix

%Change

%

Riskweighting2

% RmMix

%

Advanced Internal Ratings-based (AIRB) Approach 134 175 200 963 272 661 64 200 208 461 15 461 42 919 666 179 88,6 7,9 38,4 617 400 88,3Corporate 44 832 105 364 13 363 13 199 164 9 280 163 848 21,8 11,3 37,6 147 264 21,1Specialised lending – high volatility commercial real estate (HVCRE) 5 613 5 613 0,7 9,4 103,9 5 132 0,7Specialised lending – income-producing real estate (IPRE) 63 831 1 557 1 557 2 440 67 828 9,0 17,6 45,0 57 696 8,2Specialised lending – project finance 12 751 12 751 1,7 >100,0 20,8 5 428 0,8SME – corporate 138 7 829 17 639 17 639 1 853 27 459 3,7 (5,7) 49,4 29 105 4,2Public sector entities 7 470 10 666 277 277 18 413 2,4 51,1 13,3 12 188 1,7Local governments and municipalities 591 7 100 1 086 1 086 8 777 1,2 (2,9) 14,4 9 039 1,2Sovereign 28 666 42 639 71 305 9,5 36,9 2,4 52 098 7,5Banks 39 443 37 1 1 39 481 5,2 (31,1) 24,7 57 291 8,2Retail mortgage 103 076 5 606 97 470 9 458 112 534 15,0 0,1 36,0 112 395 16,1Retail revolving credit 13 701 13 701 68 13 769 1,8 15,8 59,2 11 892 1,7Retail – other 89 432 502 88 930 425 89 857 12,0 4,7 65,8 85 796 12,3SME – retail 24 9 31 189 24 333 6 856 1 208 32 430 4,3 4,7 40,9 30 979 4,4Securitisation exposure 260 514 1 340 1 340 2 114 0,3 92,7 37,7 1 097 0,2

The Standardised Approach (TSA) 3 384 3 234 150 18 187 21 640 43 211 5,7 17,8 49,3 36 674 5,3Corporate 5 5 5 665 5 670 0,8 17,1 84,7 4 844 0,7SME – corporate 938 829 109 1 208 63 2 209 0,3 59,0 64,9 1 389 0,2Public sector entities 379 379 <0,1 (11,0) 55,2 426 0,1Local government and municipalities 48 48 <0,1 (17,2) 70,2 58 <0,1Sovereign 1 784 2 664 4 448 0,6 87,6 53,5 2 371 0,3Banks 9 836 4 830 14 666 2,0 19,8 29,3 12 244 1,8Retail mortgage 2 348 2 312 36 4 932 4 548 11 828 1,6 6,8 40,1 11 070 1,6Retail revolving credit 379 379 <0,1 17,7 60,1 322 <0,1Retail – other 49 49 427 3 064 3 540 0,5 (7,2) 63,4 3 813 0,5SME – retail 44 44 44 <0,1 (67,9) 60,1 137 <0,1

Properties in possession 388 176 9 167 32 596 0,1 (22,8) 772 0,1Non-regulated entities 20 293 22 317 1 976 270 1 706 1 400 (8 597) 4 329 41 718 5,6 (5,7) 44 243 6,3Total Basel III balance sheet exposure3 154 468 223 668 278 197 67 713 210 484 35 080 13 043 47 248 751 704 100,0 7,5 699 089 100,0Less assets included in Basel III asset classes (48 526) (17 969) (264) (443) 179 (10 093) 1 210 (46 826) (122 468) (103 862)Derivatives (17 469) (31) (11) (17 511) (13 635)Government stock and other dated securities (9 311) (5 648) 510 (10 046) (24 495) (28 940)Short-term securities (27 797) (9 943) (1 849) (32 593) (72 182) (43 696)Call money (2 397) (46) 116 116 (1 027) (433) (116) (3 903) (10 840)Deposits with monetary institutions ( 183) (1 831) (2 014) (3 707)Remittances in transit (16) 158 7 151 47 189 234Fair-value adjustments (297) (513) 239 (20) 259 (571) (3 175)Other assets net of fair-value adjustments on assets 8 928 (11 746) (777) (430) (347) 908 4 777 (4 071) (1 981) (103)Setoff of accounts within IFRS total gross loans and advances4 (5 002) (118) (118) (5 120) (4 399)

Total gross loans and advances – 2014 105 942 200 697 277 815 67 152 210 663 24 987 14 253 422 624 116Total gross loans and advances – 2013 110 046 176 185 267 756 64 066 203 690 22 250 14 887 (296) 590 828 590 8281 Nedbank Capital and Nedbank Corporate include London Branch (AIRB Approach).2 Risk weighting is shown as a percentage of exposure at default for the AIRB Approach and as a percentage of total credit extended for TSA.3 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure (refer to next page for details).4 Relates to the difference in the level of setoff applied under IFRS when compared with the setoff applied to the balance sheet credit exposure under Basel III.

■ Nedbank Limited and the Nedbank London branch make up 95% of the total credit extended by Nedbank Group and are on the AIRB Approach. The remaining portion of the legacy Imperial Bank (ie in Nedbank Business Banking), Fairbairn Private Bank (UK) and the non-SA subsidiaries credit portfolios remain on TSA.

■ The growth in AIRB exposure was driven by: � Total exposure to wholesale asset classes increased by 14,9% to R306 803m (2013: R266 949m) with the largest proportion of this increase in

commercial mortgages (R18 095m), term loans (R12 620m) and treasury bonds (R23 448m). � Total Retail exposure increased by 3,1% to R248 590m (2013: R241 062m) mainly due to growth in the MFC gross exposure to R80 379m

(2013: R72 214m).

■ The increase in TSA exposure is mainly due to Fairbairn Private Bank (UK) and the African subsidiaries.



23c

Basel III balance sheet credit exposureReconciliation of gross loans and advances to Basel III balance sheet credit exposure by business unit and asset class

NedbankCapital1

Rm

NedbankCorporate1

Rm

Total Nedbank

RBB Rm

NedbankBusiness Banking

Rm

NedbankRetail

Rm

NedbankWealth

Rm

Rest of Africa Division

RmCentre

Rm

Nedbank Group2014

Nedbank Group2013

RmMix

%Change

%

Riskweighting2

% RmMix

%

Advanced Internal Ratings-based (AIRB) Approach 134 175 200 963 272 661 64 200 208 461 15 461 42 919 666 179 88,6 7,9 38,4 617 400 88,3Corporate 44 832 105 364 13 363 13 199 164 9 280 163 848 21,8 11,3 37,6 147 264 21,1Specialised lending – high volatility commercial real estate (HVCRE) 5 613 5 613 0,7 9,4 103,9 5 132 0,7Specialised lending – income-producing real estate (IPRE) 63 831 1 557 1 557 2 440 67 828 9,0 17,6 45,0 57 696 8,2Specialised lending – project finance 12 751 12 751 1,7 >100,0 20,8 5 428 0,8SME – corporate 138 7 829 17 639 17 639 1 853 27 459 3,7 (5,7) 49,4 29 105 4,2Public sector entities 7 470 10 666 277 277 18 413 2,4 51,1 13,3 12 188 1,7Local governments and municipalities 591 7 100 1 086 1 086 8 777 1,2 (2,9) 14,4 9 039 1,2Sovereign 28 666 42 639 71 305 9,5 36,9 2,4 52 098 7,5Banks 39 443 37 1 1 39 481 5,2 (31,1) 24,7 57 291 8,2Retail mortgage 103 076 5 606 97 470 9 458 112 534 15,0 0,1 36,0 112 395 16,1Retail revolving credit 13 701 13 701 68 13 769 1,8 15,8 59,2 11 892 1,7Retail – other 89 432 502 88 930 425 89 857 12,0 4,7 65,8 85 796 12,3SME – retail 24 9 31 189 24 333 6 856 1 208 32 430 4,3 4,7 40,9 30 979 4,4Securitisation exposure 260 514 1 340 1 340 2 114 0,3 92,7 37,7 1 097 0,2

The Standardised Approach (TSA) 3 384 3 234 150 18 187 21 640 43 211 5,7 17,8 49,3 36 674 5,3Corporate 5 5 5 665 5 670 0,8 17,1 84,7 4 844 0,7SME – corporate 938 829 109 1 208 63 2 209 0,3 59,0 64,9 1 389 0,2Public sector entities 379 379 <0,1 (11,0) 55,2 426 0,1Local government and municipalities 48 48 <0,1 (17,2) 70,2 58 <0,1Sovereign 1 784 2 664 4 448 0,6 87,6 53,5 2 371 0,3Banks 9 836 4 830 14 666 2,0 19,8 29,3 12 244 1,8Retail mortgage 2 348 2 312 36 4 932 4 548 11 828 1,6 6,8 40,1 11 070 1,6Retail revolving credit 379 379 <0,1 17,7 60,1 322 <0,1Retail – other 49 49 427 3 064 3 540 0,5 (7,2) 63,4 3 813 0,5SME – retail 44 44 44 <0,1 (67,9) 60,1 137 <0,1

Properties in possession 388 176 9 167 32 596 0,1 (22,8) 772 0,1Non-regulated entities 20 293 22 317 1 976 270 1 706 1 400 (8 597) 4 329 41 718 5,6 (5,7) 44 243 6,3Total Basel III balance sheet exposure3 154 468 223 668 278 197 67 713 210 484 35 080 13 043 47 248 751 704 100,0 7,5 699 089 100,0Less assets included in Basel III asset classes (48 526) (17 969) (264) (443) 179 (10 093) 1 210 (46 826) (122 468) (103 862)Derivatives (17 469) (31) (11) (17 511) (13 635)Government stock and other dated securities (9 311) (5 648) 510 (10 046) (24 495) (28 940)Short-term securities (27 797) (9 943) (1 849) (32 593) (72 182) (43 696)Call money (2 397) (46) 116 116 (1 027) (433) (116) (3 903) (10 840)Deposits with monetary institutions ( 183) (1 831) (2 014) (3 707)Remittances in transit (16) 158 7 151 47 189 234Fair-value adjustments (297) (513) 239 (20) 259 (571) (3 175)Other assets net of fair-value adjustments on assets 8 928 (11 746) (777) (430) (347) 908 4 777 (4 071) (1 981) (103)Setoff of accounts within IFRS total gross loans and advances4 (5 002) (118) (118) (5 120) (4 399)

Total gross loans and advances – 2014 105 942 200 697 277 815 67 152 210 663 24 987 14 253 422 624 116Total gross loans and advances – 2013 110 046 176 185 267 756 64 066 203 690 22 250 14 887 (296) 590 828 590 8281 Nedbank Capital and Nedbank Corporate include London Branch (AIRB Approach).2 Risk weighting is shown as a percentage of exposure at default for the AIRB Approach and as a percentage of total credit extended for TSA.3 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure (refer to next page for details).4 Relates to the difference in the level of setoff applied under IFRS when compared with the setoff applied to the balance sheet credit exposure under Basel III.

■ Nedbank Limited and the Nedbank London branch make up 95% of the total credit extended by Nedbank Group and are on the AIRB Approach. The remaining portion of the legacy Imperial Bank (ie in Nedbank Business Banking), Fairbairn Private Bank (UK) and the non-SA subsidiaries credit portfolios remain on TSA.

■ The growth in AIRB exposure was driven by: � Total exposure to wholesale asset classes increased by 14,9% to R306 803m (2013: R266 949m) with the largest proportion of this increase in

commercial mortgages (R18 095m), term loans (R12 620m) and treasury bonds (R23 448m). � Total Retail exposure increased by 3,1% to R248 590m (2013: R241 062m) mainly due to growth in the MFC gross exposure to R80 379m

(2013: R72 214m).

■ The increase in TSA exposure is mainly due to Fairbairn Private Bank (UK) and the African subsidiaries.

24c

Summary of the components of the total Basel III balance sheet exposure by business cluster and asset classOn-balance-sheet

exposureOff-balance-sheet

exposureRepurchase and resale exposure

Derivative exposure

Total credit extended1

Total Basel III balance sheet credit exposure2

Exposure at default (EAD)

Downturn expected loss (dEL)3 BEEL4

2014 2014 2014 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Rm AIRB TSA AIRB TSA AIRB TSA AIRB TSA AIRB TSA AIRB TSA AIRB TSA AIRB TSA AIRB AIRB AIRB AIRB AIRB AIRB

Nedbank Capital 98 416 25 105 18 290 17 469 159 280 158 896 134 175 133 721 121 961 119 769 240 148 65 321Corporate 35 260 13 600 7 295 2 277 58 432 59 969 44 832 42 032 42 322 46 056 159 112 65 299Specialised lending – IPRESpecialised lending – project finance 11 956 2 952 795 15 703 5 428 12 751 5 428 16 150 5 662 26 7 21SME – corporate 138 138 1 234 138 1 234 734 553 1 3Public sector entities 4 435 208 1 801 1 234 7 678 6 423 7 470 6 213 4 967 4 950 <1Local governments and municipalities 145 446 591 695 591 695 326 249 <1Sovereign 25 992 63 2 660 14 28 729 23 790 28 666 23 756 26 227 18 035 3 1 1Banks 20 368 4 960 6 534 12 541 44 403 55 045 39 443 54 120 27 596 37 903 51 25Securities firms 17 SME – retail 24 24 35 24 35 40 84 <1Securitisation exposure 260 3 322 3 582 6 277 260 208 3 582 6 277 <1

Nedbank Corporate 200 963 76 812 277 775 247 666 185 200 963 176 744 185 254 935 226 636 753 537 446 451Corporate 105 364 65 069 170 433 152 627 4 105 364 94 377 4 148 681 134 585 437 186 24 142Specialised lending – HVCRE 5 613 343 5 956 5 171 5 613 5 083 5 956 5 172 70 130 280 231Specialised lending – IPRE 63 831 2 325 66 156 55 892 63 831 54 291 69 494 57 437 210 197 138 75SME – corporate 7 829 972 8 801 10 840 181 7 829 9 469 181 8 755 10 910 30 23Public sector entities 10 666 2 846 13 512 10 404 10 666 5 725 13 400 9 520 5 <1Local governments and municipalities 7 100 379 7 479 7 882 7 100 7 112 7 543 7 730 1 1SovereignSecurities firms 1 328 156 <1Banks 37 4 851 4 888 2 923 37 168 568 563 <1SME – retail 9 27 36 89 9 9 24 53 <1 4 3Securitisation exposure 514 514 510 514 510 514 510

Nedbank Business Banking 64 200 3 234 26 290 568 90 490 3 802 84 900 4 527 64 200 3 234 60 300 3 979 88 529 83 040 645 556 751 749Corporate 13 199 5 786 18 985 15 386 1 13 199 10 600 1 17 939 14 551 97 93 114 107Specialised lending – IPRE 1 557 284 1 841 2 015 1 557 1 771 1 854 2 028 5 6 4SME – corporate 17 639 829 8 861 124 26 500 953 25 673 1 147 17 639 829 16 944 1 043 26 312 25 463 187 143 93 140Public sector entities 277 14 291 267 277 250 294 268 <1Local governments and municipalities 1 086 2 1 088 1 234 1 086 1 232 1 126 1 278 1 1Banks 1 1 2 1 2 Retail mortgage 5 606 2 312 2 105 444 7 711 2 756 8 184 3 084 5 606 2 312 6 033 2 640 7 249 7 669 47 42 119 130Retail – other 502 49 73 575 49 593 158 502 49 514 158 543 555 6 6 11 13SME – retail 24 333 44 9 164 33 497 44 31 548 137 24 333 44 22 956 137 33 210 31 228 302 265 414 355

Nedbank Retail 208 461 150 41 486 76 249 947 226 240 790 208 208 461 150 201 142 148 237 808 230 942 4 270 3 733 5 001 5 591Corporate 164 5 1 942 2 106 5 1 415 8 164 5 88 8 500 404 13 8SME – corporate 109 70 179 152 109 98Retail mortgage 97 470 36 18 017 6 115 487 42 115 435 48 97 470 36 97 357 42 117 636 117 323 790 748 1 195 1 494Retail revolving credit 13 701 16 426 30 127 27 159 13 701 11 835 20 115 18 681 643 601 960 888Retail – other 88 930 871 89 801 85 696 88 930 84 886 89 661 85 655 2 644 2 231 2 653 2 980Banks 74 74 74 SME – retail 6 856 4 156 11 012 10 706 6 856 6 597 8 482 8 500 180 145 193 229Securitisation exposure 1 340 1 340 379 1 340 379 1 340 379



25c




Derivative exposure





2014 2014 2014 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013


Nedbank Capital 98 416 25 105 18 290 17 469 159 280 158 896 134 175 133 721 121 961 119 769 240 148 65 321Corporate 35 260 13 600 7 295 2 277 58 432 59 969 44 832 42 032 42 322 46 056 159 112 65 299Specialised lending – IPRESpecialised lending – project finance 11 956 2 952 795 15 703 5 428 12 751 5 428 16 150 5 662 26 7 21SME – corporate 138 138 1 234 138 1 234 734 553 1 3Public sector entities 4 435 208 1 801 1 234 7 678 6 423 7 470 6 213 4 967 4 950 <1Local governments and municipalities 145 446 591 695 591 695 326 249 <1Sovereign 25 992 63 2 660 14 28 729 23 790 28 666 23 756 26 227 18 035 3 1 1Banks 20 368 4 960 6 534 12 541 44 403 55 045 39 443 54 120 27 596 37 903 51 25Securities firms 17 SME – retail 24 24 35 24 35 40 84 <1Securitisation exposure 260 3 322 3 582 6 277 260 208 3 582 6 277 <1

Nedbank Corporate 200 963 76 812 277 775 247 666 185 200 963 176 744 185 254 935 226 636 753 537 446 451Corporate 105 364 65 069 170 433 152 627 4 105 364 94 377 4 148 681 134 585 437 186 24 142Specialised lending – HVCRE 5 613 343 5 956 5 171 5 613 5 083 5 956 5 172 70 130 280 231Specialised lending – IPRE 63 831 2 325 66 156 55 892 63 831 54 291 69 494 57 437 210 197 138 75SME – corporate 7 829 972 8 801 10 840 181 7 829 9 469 181 8 755 10 910 30 23Public sector entities 10 666 2 846 13 512 10 404 10 666 5 725 13 400 9 520 5 <1Local governments and municipalities 7 100 379 7 479 7 882 7 100 7 112 7 543 7 730 1 1SovereignSecurities firms 1 328 156 <1Banks 37 4 851 4 888 2 923 37 168 568 563 <1SME – retail 9 27 36 89 9 9 24 53 <1 4 3Securitisation exposure 514 514 510 514 510 514 510

Nedbank Business Banking 64 200 3 234 26 290 568 90 490 3 802 84 900 4 527 64 200 3 234 60 300 3 979 88 529 83 040 645 556 751 749Corporate 13 199 5 786 18 985 15 386 1 13 199 10 600 1 17 939 14 551 97 93 114 107Specialised lending – IPRE 1 557 284 1 841 2 015 1 557 1 771 1 854 2 028 5 6 4SME – corporate 17 639 829 8 861 124 26 500 953 25 673 1 147 17 639 829 16 944 1 043 26 312 25 463 187 143 93 140Public sector entities 277 14 291 267 277 250 294 268 <1Local governments and municipalities 1 086 2 1 088 1 234 1 086 1 232 1 126 1 278 1 1Banks 1 1 2 1 2 Retail mortgage 5 606 2 312 2 105 444 7 711 2 756 8 184 3 084 5 606 2 312 6 033 2 640 7 249 7 669 47 42 119 130Retail – other 502 49 73 575 49 593 158 502 49 514 158 543 555 6 6 11 13SME – retail 24 333 44 9 164 33 497 44 31 548 137 24 333 44 22 956 137 33 210 31 228 302 265 414 355

Nedbank Retail 208 461 150 41 486 76 249 947 226 240 790 208 208 461 150 201 142 148 237 808 230 942 4 270 3 733 5 001 5 591Corporate 164 5 1 942 2 106 5 1 415 8 164 5 88 8 500 404 13 8SME – corporate 109 70 179 152 109 98Retail mortgage 97 470 36 18 017 6 115 487 42 115 435 48 97 470 36 97 357 42 117 636 117 323 790 748 1 195 1 494Retail revolving credit 13 701 16 426 30 127 27 159 13 701 11 835 20 115 18 681 643 601 960 888Retail – other 88 930 871 89 801 85 696 88 930 84 886 89 661 85 655 2 644 2 231 2 653 2 980Banks 74 74 74 SME – retail 6 856 4 156 11 012 10 706 6 856 6 597 8 482 8 500 180 145 193 229Securitisation exposure 1 340 1 340 379 1 340 379 1 340 379

26c




Derivative exposure





2014 2014 2014 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013


Nedbank Wealth 15 461 18 156 4 917 486 31 20 378 18 673 18 501 15 786 15 461 18 187 13 983 15 384 23 006 20 678 61 44 130 128Corporate 9 1 10 4 1 9 3 1 11 8 <1Specialised lending – HVCRE 49 49 49 <1Specialised lending – IPRE 2 440 299 2 739 1 846 2 440 1 634 3 142 2 165 14 8 2SME – corporate 1 853 1 208 182 2 035 1 208 1 582 1 853 1 208 1 458 2 289 1 779 4 3 32 35Sovereign 1 784 1 784 226 1 784 226Banks 9 822 14 9 836 9 364 9 836 9 364Retail mortgage 9 458 4 932 3 836 13 294 4 932 12 682 4 453 9 458 4 932 9 005 4 453 14 337 13 556 27 23 89 65Retail revolving credit 68 226 294 268 68 57 583 538 2 2 1 3Retail – other 425 410 131 486 17 556 913 494 1 742 425 427 395 1 340 635 549 9 3 2 3SME – retail 1 208 242 1 450 1 576 1 208 1 382 2 009 2 034 5 5 6 20

Rest of Africa Division 21 629 3 179 11 24 819 20 868 21 640 16 978Corporate 5 654 2 262 11 7 927 7 873 5 665 4 830SME – corporate 63 50 113 114 63 67Public sector entities 379 52 431 451 379 426Local governments and municipalities 48 1 49 127 48 58Sovereign 2 664 2 664 2 145 2 664 2 145Banks 4 830 153 4 983 3 053 4 830 2 880Retail mortgage 4 548 1 4 549 3 936 4 548 3 935Retail revolving credit 379 658 1 037 853 379 322Retail – other 3 064 2 3 066 2 316 3 064 2 315

Centre 42 919 42 919 31 586 3 42 919 31 510 42 926 31 624 8 50 20Corporate 280 280 183 280 166 286 187 7 5 20Sovereign 42 639 42 639 28 342 42 639 28 342 42 639 28 342 1 <1Banks 3 061 3 3 002 1 3 095 45

Total 630 420 43 169 174 610 4 309 18 290 17 469 42 840 789 47 520 782 339 41 577 666 179 43 211 617 400 36 674 769 165 712 689 5 977 5 068 6 393 7 260

Downturn expected loss (AIRB Approach) 12 370 12 328Expected loss performing book 5 977 5 068BEEL on defaulted advances 6 393 7 260

IFRS impairment on AIRB loans and advances (10 785) (11 112)

Excess of downturn expected loss over eligible provisions 1 585 1 2161 Total credit extended includes on-balance-sheet, off-balance-sheet (including unutilised facilities), repurchase and resale agreements and derivative exposure.2 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure.3 dEL is in relation to performing loans and advances.4 Best estimate of expected loss (BEEL) is in relation to defaulted loans and advances.


27c




Derivative exposure





2014 2014 2014 2014 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013


Nedbank Wealth 15 461 18 156 4 917 486 31 20 378 18 673 18 501 15 786 15 461 18 187 13 983 15 384 23 006 20 678 61 44 130 128Corporate 9 1 10 4 1 9 3 1 11 8 <1Specialised lending – HVCRE 49 49 49 <1Specialised lending – IPRE 2 440 299 2 739 1 846 2 440 1 634 3 142 2 165 14 8 2SME – corporate 1 853 1 208 182 2 035 1 208 1 582 1 853 1 208 1 458 2 289 1 779 4 3 32 35Sovereign 1 784 1 784 226 1 784 226Banks 9 822 14 9 836 9 364 9 836 9 364Retail mortgage 9 458 4 932 3 836 13 294 4 932 12 682 4 453 9 458 4 932 9 005 4 453 14 337 13 556 27 23 89 65Retail revolving credit 68 226 294 268 68 57 583 538 2 2 1 3Retail – other 425 410 131 486 17 556 913 494 1 742 425 427 395 1 340 635 549 9 3 2 3SME – retail 1 208 242 1 450 1 576 1 208 1 382 2 009 2 034 5 5 6 20

Rest of Africa Division 21 629 3 179 11 24 819 20 868 21 640 16 978Corporate 5 654 2 262 11 7 927 7 873 5 665 4 830SME – corporate 63 50 113 114 63 67Public sector entities 379 52 431 451 379 426Local governments and municipalities 48 1 49 127 48 58Sovereign 2 664 2 664 2 145 2 664 2 145Banks 4 830 153 4 983 3 053 4 830 2 880Retail mortgage 4 548 1 4 549 3 936 4 548 3 935Retail revolving credit 379 658 1 037 853 379 322Retail – other 3 064 2 3 066 2 316 3 064 2 315

Centre 42 919 42 919 31 586 3 42 919 31 510 42 926 31 624 8 50 20Corporate 280 280 183 280 166 286 187 7 5 20Sovereign 42 639 42 639 28 342 42 639 28 342 42 639 28 342 1 <1Banks 3 061 3 3 002 1 3 095 45

Total 630 420 43 169 174 610 4 309 18 290 17 469 42 840 789 47 520 782 339 41 577 666 179 43 211 617 400 36 674 769 165 712 689 5 977 5 068 6 393 7 260

Downturn expected loss (AIRB Approach) 12 370 12 328Expected loss performing book 5 977 5 068BEEL on defaulted advances 6 393 7 260

IFRS impairment on AIRB loans and advances (10 785) (11 112)

Excess of downturn expected loss over eligible provisions 1 585 1 2161 Total credit extended includes on-balance-sheet, off-balance-sheet (including unutilised facilities), repurchase and resale agreements and derivative exposure.2 Balance sheet credit exposure includes on-balance-sheet, repurchase and resale agreements and derivative exposure.3 dEL is in relation to performing loans and advances.4 Best estimate of expected loss (BEEL) is in relation to defaulted loans and advances.

28c

DEFAULTED ADVANCES ■ The defaulted advances continued the downward trend observed from 2010, decreasing by 11,2% to R15 846m (2013: R17 848m), which was

mainly driven by ongoing improvements in Nedbank Retail as well as Nedbank Capital. ■ Nedbank Retail accounts for 64,2% of total defaulted advances and decreased to R10 179m (2013: R11 402m), or 4,83% of gross loans and

advances. This is the result of sustained excellence in collection efforts, effective client rehabilitations (including restructures and rearrangements) and booking better quality new business.

■ Business Banking defaulted advances decreased to R2 087m (2013: R2 334m), or 3,11% of gross loans and advances. ■ Nedbank Capital defaulted advances decreased to R209m (2013: R661m), due to proactive recovery processes and disciplined risk management. ■ Nedbank Corporate defaulted advances decreased to R2 550m (2013: R2 745m) mainly due to the restructuring of previously defaulted clients in

Property Finance. ■ Nedbank Wealth defaulted advances increased to R599m (2013: R525m), due to the deterioration of business rescue clients moving to liquidation

as well as an increase in properties in possession to R32m (2013: R16m).

Nedbank Group key defaulted advances metrics2010 2011 2012 2013 2014

Gross loans and advances (Rm) 488 452 510 520 538 036 590 828 624 116

Defaulted advances (Rm) 26 765 23 210 19 273 17 8483 15 846Wholesale1 defaulted advances 8 424 8 219 6 141 5 740 4 846Retail defaulted advances 17 719 14 350 12 449 11 4023 10 179Defaulted advances excluding Personal Loans2 25 483 21 485 16 666 15 0203 13 344

Personal Loans2 defaulted advances 1 282 1 725 2 607 2 828 2 502

Defaulted advances as a % of gross loans and advances (%) 5,48 4,55 3,58 3,023 2,54Wholesale 3,17 2,85 1,99 1,64 1,30Retail 9,09 7,50 6,27 5,603 4,83

Retail (excluding Personal Loans2) 9,02 7,25 5,58 4,673 3,97

Properties in possession as a % of total gross loans and advances 0,14 0,12 0,11 0,13 0,101 Wholesale includes Nedbank Capital, Nedbank Corporate and Nedbank Business Banking.2 Personal Loans represents a specific business unit within Nedbank Retail.3 Restated due to the reclassification of restructures in MFC as defaulted advances.

Nedbank Group defaulted advances by business cluster2010 2011 2012 2013 2014

Rm Mix % Rm Mix % Rm Mix % Rm Mix %5 Rm Mix %

Nedbank Capital 1 287 4,8 1 454 6,3 776 4,0 661 3,7 209 1,3Nedbank Corporate 3 853 14,4 3 684 15,9 2 768 14,4 2 745 15,4 2 550 16,1

Corporate Banking 316 1,2 86 0,4 200 1,0 728 4,1 741 4,7Property Finance 3 537 13,2 3 598 15,5 2 568 13,4 2 017 11,3 1 809 11,4

Total Nedbank RBB1 21 003 78,4 17 431 75,1 15 046 78,1 13 7365 77,0 12 266 77,4Nedbank Business Banking 3 284 12,2 3 081 13,3 2 597 13,5 2 334 13,1 2 087 13,2Nedbank Retail2 17 719 66,2 14 350 61,8 12 449 64,6 11 4025 63,9 10 179 64,2

Home Loans3 12 822 47,9 8 652 37,3 6 242 32,4 4 746 26,6 4 053 25,6MFC 2 982 11,1 1 956 8,4 1 707 8,9 1 933 10,8 1 898 12,0Personal Loans4 1 282 4,8 1 725 7,4 2 607 13,5 2 828 15,8 2 502 15,8Card 507 1,9 519 2,2 614 3,2 824 4,6 892 5,6

Nedbank Wealth 367 1,4 443 1,9 555 2,9 525 2,9 599 3,8

Rest of Africa Division 255 1,0 198 0,8 128 0,6 181 1,0 222 1,4

Nedbank Group 26 765 100,0 23 210 100,0 19 273 100,0 17 8485 100,0 15 846 100,01 RBB = Retail and Business Banking.2 Only key Nedbank Retail business units are reflected.3 Home Loans represents a specific business unit within Nedbank Retail.4 Personal Loans represents a specific business unit within Nedbank Retail.5 Restated due to the reclassification of restructures in MFC as defaulted advances.



29c

Nedbank Group defaulted advances by product2013 2014

Rm Mix %1 Rm Mix % Change %

Residential mortgages 6 613 37,0 5 649 35,6 (14,6)Commercial mortgages 2 050 11,5 1 959 12,4 (4,4)Leases and instalment sales 2 4231 13,6 2 309 14,6 (4,7)Card 830 4,7 903 5,7 8,8Personal Loans 2 847 16,0 2 536 16,0 (10,9)Properties in possession 772 4,3 596 3,8 (22,7)

Other loans and advances 2 313 12,9 1 894 11,9 (18,1)

Nedbank Group 17 8481 100,0 15 846 100,0 (11,2)1 Restated due to the reclassification of restructures in MFC as defaulted advances.

Defaulted advances as a percentage of gross loans and advances%

20142013201220112010

DEFAULTED ADVANCES AS A PERCENTAGE OF GROSS LOANS AND ADVANCES

13 3

44

15 0

203

16 6

66

21 4

85

25 4

83

15 8

46

17 8

483

19 2

73

23 2

10

26 7

65

9,09

5,48

9,02

3,17

4,83

2,543,97

1,30

5,603

3,023

1,64

4,673

(11,2%)

Total RetailTotal Retail (excluding Personal Loans1)Total Nedbank Group

Total Wholesale2

Defaulted advances excluding Personal Loans1 (Rm)

Personal Loans defaulted advances1 (Rm)

6,27

3,581,99

5,58

7,50

4,552,85

7,25

1 282 1 725 2 607 2 828 2 502

1 Personal Loans represents a specific business unit within Nedbank Retail.2 Wholesale includes Nedbank Capital, Nedbank Corporate and Nedbank Business Banking.3 Restated due to the reclassification of restructures in MFC as defaulted advances.

30c

CREDIT LOSS RATIO ■ The Nedbank Group CLR decreased to 0,79% (2013: 1,06%) and now falls below the TTC target range of 0,80% to 1,20%. The focus on selective

asset origination and disciplined risk management supported the improvement. � The decrease in specific CLR to 0,72% (2013: 0,97%) is in line with decreases in defaulted advances. � The change in product mix positively impacted the group CLR. Personal loans, which attract a higher level of impairments, are now a smaller

portion of gross loans and advances. The decrease in the group CLR was further supported by the low CLRs in Nedbank Capital, Corporate, Business Banking and Wealth, as well as Home Loans in Nedbank Retail.

■ The CLRs across the business clusters were either at the lower end of, or better than, their respective TTC target ranges. A strong risk management and collections focus resulted in improved impairments charges across the group to support the reduction in CLRs.

� The Nedbank Capital CLR improved to 0,14% (2013: 0,51%) as a result of proactive recovery processes and disciplined risk management. � The Nedbank Corporate CLR remained at the lower end of the TTC CLR target range at 0,21% (2013: 0,23%). � Effective risk management practices within the cluster improved the Business Banking CLR to 0,42% (2013: 0,65%). � The Nedbank Retail CLR at 1,70% (2013: 2,16%) has decreased significantly due to lower impairments in Home Loans and Personal Loans. The

CLR is now below the TTC target range of 1,90% to 2,60%. � Nedbank Wealth is below the TTC target range and no material movement in impairments was evident over 2014.

Components of credit loss ratio per business cluster

%Nedbank

CapitalNedbank

Corporate

TotalNedbank

RBB

NedbankBusinessBanking

Nedbank Retail

Nedbank Wealth

Rest of Africa

DivisionNedbank

Group

Through-the-cycle target ranges 0,10 – 0,55 0,20 – 0,35 0,55 – 0,75 1,90 – 2,60 0,20 – 0,40 0,80 – 1,20

2014Total credit loss ratio 0,14 0,21 1,39 0,42 1,70 0,17 0,23 0,79

Specific credit loss ratio 0,06 0,18 1,36 0,29 1,69 0,18 0,24 0,72Portfolio credit loss ratio 0,08 0,03 0,03 0,13 0,01 (0,01) (0,01) 0,07


Specific credit loss ratio 0,49 0,19 1,651 0,52 2,011 0,27 0,29 0,971

Portfolio credit loss ratio 0,02 0,04 0,151 0,13 0,151 0,01 0,08 0,091


Specific credit loss ratio 0,99 0,23 1,38 0,28 1,72 0,61 0,09 0,91Portfolio credit loss ratio 0,07 0,01 0,24 0,06 0,29 0,14 0,14


Specific credit loss ratio 1,27 0,33 1,45 0,46 1,77 0,26 0,22 1,01Portfolio credit loss ratio (0,04) (0,04) 0,17 0,07 0,21 (0,01) (0,01) 0,12


Specific credit loss ratio 1,17 0,25 2,08 0,71 2,45 0,16 0,38 1,32Portfolio credit loss ratio 0,10 (0,06) 0,10 (0,31) 0,22 (0,01) 0,04 0,04

1 Restated due to the reclassification of restructures in MFC as defaulted advances.



31c

Summary of the credit loss ratio by business clusterMix of average banking

advancesImpairment

chargeCredit loss

ratio

2014 2013 2014 2013 2014 2013% % Rm Mix % Rm Mix % % %

Nedbank Group 100,0 100,0 4 506 100,0 5 565 100,0 0,79 1,06Nedbank Capital 12,8 11,5 106 2,4 306 5,5 0,14 0,51Nedbank Corporate1 33,1 32,1 400 8,9 385 6,9 0,21 0,23

Corporate Banking 15,2 15,5 192 4,3 155 2,8 0,22 0,19Property Finance 17,5 16,2 208 4,6 230 4,1 0,21 0,27

Nedbank Business Banking 11,4 12,0 271 6,0 410 7,4 0,42 0,65Nedbank Retail1 36,0 38,3 3 500 77,7 4 355 78,2 1,70 2,16

Home Loans 14,2 15,8 105 2,3 298 5,4 0,13 0,36MFC 11,9 11,5 852 18,9 732 13,1 1,25 1,21Consumer Banking 3,5 4,3 1 921 42,7 2 716 48,8 9,70 11,91

Personal Loans 3,3 4,1 1 879 41,7 2 666 47,9 10,04 12,23Client Engagement 0,2 0,2 42 1,0 50 0,9 3,87 4,89

Relationship Banking 4,3 4,6 18 0,4 79 1,4 0,07 0,33Card 2,2 2,1 604 13,4 530 9,5 4,79 4,92

Nedbank Wealth 4,2 4,0 41 0,9 59 1,1 0,17 0,28Rest of Africa Division 2,6 2,1 35 0,8 50 0,9 0,23 0,371 The central units in Corporate Banking and Retail do not contribute to CLR and are excluded from the table.

Nedbank Retail credit loss ratio per business unit%

20142013201220112010

%

NEDBANK RETAIL CREDIT LOSS RATIO PER BUSINESS UNIT

1,70

10,04

1,25

4,79

Personal Loans

Card

Nedbank Retail

MFC

Home Loans

Retail Relationship Banking

0,132,20

7,58

2,38

3,732,67

7,74

1,54

3,231,98

0,59

11,02

1,05

3,902,01

1,26

2,16

0,36

12,23

1,21

4,92

0,07

2,601,47

0,72

0,33

32c

IMPAIRMENTS ■ The income statement impairments charge decreased by 19,0% to R4 506m (2013: R5 565m) due to good risk management across portfolios.

� The Nedbank Retail impairments charge decreased to R3 500m (2013: R4 355m), with specific impairments declining by R549m to R3 494m (2013: R4 043m), driven mainly by lower defaulted advances in the Personal Loans and Home Loans portfolios.

� Collections processes are robust and generated postwriteoff recoveries of R941m (2013: R888m), reflecting the prudency of cash accounting recoveries on the writeoff book. This includes recoveries in Personal Loans of R343m (2013: R276m).

� Retail writeoffs increased to R5 009m (2013: R4 760m) driven by: — Higher writeoffs have been noted in MFC and Card, which is reflective of the growth in these portfolios. — Home Loans writeoffs decreased as a result of the smaller defaulted portfolio, as well as successful collections strategies aimed at

rehabilitating clients. — An increase in the writeoffs of older personal-loan accounts have been noted, in particular where all collections efforts have been exhausted.

� The Nedbank Business Banking impairments charge decreased to R271m (2013: R410m), which included a single large impairment of R182m in the first half of 2013).

� The Nedbank Wealth impairments remained stable year on year.

■ During 2014 the total balance sheet impairments decreased to R11 095m (2013: R11 456m), with specific impairments decreasing to R6 832m (2013: R7 543m) and portfolio impairments increasing to R4 263m (2013: R3 913m).

■ The Central portfolio impairment held increased to R350m (2013: R200m) in line with the group’s view of a protracted weak economic environment.

Nedbank Group summary of key impairment trends 2010 2011 2012 2013 2014

Total income statement impairments net of recoveries (Rm) 6 188 5 331 5 199 5 565 4 506 Specific impairments 5 994 4 753 4 517 5 0913 4 143 Portfolio impairments 194 578 682 4743 363

Total balance sheet impairments (Rm) 11 226 11 497 10 870 11 456 11 095 Specific impairments 9 072 8 749 7 443 7 5433 6 832 Portfolio impairments 2 154 2 748 3 427 3 9133 4 263

Total impairments to gross loans and advances (%) 2,31 2,25 2,02 1,94 1,78 Total wholesale1 1,25 1,22 0,84 0,77 0,75Nedbank Retail 3,88 3,97 3,98 4,05 3,61 Home Loans2 2,99 3,32 2,92 2,56 2,18 MFC 3,80 3,71 3,19 3,23 2,69Personal Loans 7,09 7,30 9,80 12,66 13,92Card 7,21 6,93 7,04 7,79 7,21

1 Wholesale includes Nedbank Capital, Nedbank Corporate and Nedbank Business Banking.2 Home Loans represents a specific business unit within Nedbank Retail. This excludes home loans in the Nedbank Relationship Banking and Business Banking business units.3 Restated due to the reclassification of restructures in MFC as defaulted advances.

BALANCE SHEET COVERAGE RATIOS ■ The group's total-coverage ratio increased to 70,0% (2013: 64,2%) and the specific-coverage ratio improved to 43,1% (2013: 42,3%), mainly driven

by increased specific impairments raised in the Corporate Cluster. Portfolio coverage increased to 0,70% (2013: 0,68%). ■ The Nedbank Retail total coverage increased to 74,7% (2013: 72,4%) driven by:

� Specific coverage decreased to 49,4% (2013: 49,9%) driven by the decision to write off R378m of fully provided advances in MFC. � Portfolio coverage on Nedbank Retail decreased slightly to 1,28% (2013: 1,33%) mainly driven by changes in portfolio mix.

■ Wholesale total coverage increased to 58,1% (2013: 46,8%) with portfolio coverage increasing to 0,34% (2013: 0,30%) and specific coverage increasing to 32,3% (2013: 28,6%).

� Portfolio coverage remained stable in both the Corporate Banking and Property Finance portfolios in the Nedbank Corporate Cluster, while the specific-coverage ratio increased to 26,0% (2013: 17,6%) due to increased provisioning on a single large counterparty.

� The Nedbank Business Banking portfolio coverage increased to 0,82% (2013: 0,72%) due to impairments raised as a result of the general economic pressure on SME clients.

� The Nedbank Capital portfolio coverage increased to 0,23% (2013: 0,16%).



33c

Nedbank Group coverage ratios by business cluster % 2010 2011 2012 2013 2014

Total-coverage ratio 41,9 49,5 56,4 64,21 70,0 Nedbank Capital 71,8 56,5 54,0 75,2 163,2 Nedbank Corporate 32,5 32,3 32,4 33,2 44,7 Nedbank Business Banking 38,2 49,0 48,5 54,9 63,9 Nedbank Retail 42,7 53,0 63,3 72,41 74,7 Nedbank Wealth 29,2 17,3 20,1 32,0 28,0 Rest of Africa Division 45,5 48,5 114,1 103,3 81,1

Specific-coverage ratio 33,9 37,7 38,6 42,31 43,1 Nedbank Capital 62,7 49,7 33,4 48,9 47,4 Nedbank Corporate 23,6 23,1 19,2 17,6 26,0 Nedbank Business Banking 30,9 38,3 34,4 35,8 38,5 Nedbank Retail 35,2 41,2 45,2 49,91 49,4 Nedbank Wealth 18,5 12,0 15,9 26,9 23,9 Rest of Africa Division 29,4 25,8 43,8 47,0 47,3

Portfolio coverage ratio 0,47 0,56 0,66 0,681 0,70 Nedbank Capital 0,19 0,15 0,20 0,16 0,23 Nedbank Corporate 0,27 0,22 0,23 0,25 0,24 Nedbank Business Banking 0,50 0,57 0,62 0,72 0,82 Nedbank Retail 0,75 0,96 1,21 1,331 1,28 Nedbank Wealth 0,15 0,12 0,12 0,12 0,10 Rest of Africa Division 0,47 0,45 0,72 0,70 0,53

1 Restated due to the reclassification of restructures in MFC as defaulted advances.

Retail specific-coverage ratio%

RETAIL SPECIFIC COVERAGE RATIO

56,360,4

97,3

20,8

94,4

65,953,64

27,2

20142013201220112010

Card

MFC

Personal Loans1

Home Loans2

Total Retail

49,4

49,9

3

45,2

41,2

35,2

100,2 98,0 93,7

56,6

59,462,1

61,8

58,6

67,03

28,6 30,3 28,2

Retail portfolio coverage ratio%

RETAIL PORTFOLIO COVERAGE RATIO

0,88

1,311,08

0,51

4,99

1,350,970,86

20142013201220112010

Personal Loans1

Card

MFC

Home Loans2

Total Retail

1,28

1,333

1,21

0,96

0,75

1,83 3,21

4,58

1,431,48 1,2830,911,03 1,06

0,62 0,73 0,92

1 Personal Loans represents a specific business unit within Nedbank Retail.2 Home Loans represents a specific business unit within Nedbank Retail. This excludes home loans in the Nedbank Retail Relationship Banking business unit.3 Restated due to the reclassification of restructures in MFC as defaulted advances.4 Restated defaulted restructured accounts and related provisions which were incorrectly classified in Dec 2013 as performing and have now been correctly classified as defaulted to better reflect the underlying nature. There was a

prospective change in the writeoff policy of the MFC portfolio during the second half of 2014. Although the 2013 coverage ratios are not required to be restated should the change have applied retrospectively, the 2013 coverage ratio would have been 57,14% for defaulted advances and 2,57% for total advances.

34c

Defaulted advances, specific impairments and specific-coverage ratio by business cluster and product2014 2013

Defaulted loansand advances

Expected recoveries Specific impairments

Specific-coverage

ratioDefaulted loans

and advancesExpected

recoveries Specific impairments

Specific- coverage

ratio

RmAs %

of total Rm RmAs %

of total

On defaultedadvances

Rm

Fordiscounted

cashflowlosses

Rm % RmAs %

of total Rm RmAs %

of total


Rm

Fordiscounted

cashflowlosses

Rm %

Nedbank Capital 209 1,3 110 99 1,4 98 1 47,4 661 3,7 338 323 4,3 320 3 48,9Other loans and advances 209 1,3 110 99 1,4 98 1 47,4 661 3,7 338 323 4,3 320 3 48,9

Nedbank Corporate 2 550 16,1 1 886 664 9,7 411 253 26,0 2 745 15,4 2 263 482 6,5 323 159 17,6Residential mortgages 27 0,2 19 8 0,1 5 3 29,6Commercial mortgages 1 421 9,0 1 003 418 6,1 169 249 29,4 1 490 8,3 1 161 329 4,4 174 155 22,1Leases and instalment debtors 7 <0,1 4 3 3 42,9 21 0,1 15 6 0,1 6 28,6Properties in possession 388 2,4 388 498 2,8 498Other loans and advances 734 4,6 491 243 3,6 239 4 33,1 709 4,0 570 139 1,9 138 1 19,6

Nedbank Business Banking 2 087 13,2 1 284 803 11,8 621 182 38,5 2 334 13,1 1 499 835 11,2 644 191 35,8Residential mortgages 763 4,8 541 222 3,2 142 80 29,1 932 5,2 684 248 3,3 158 90 26,6Commercial mortgages 365 2,3 284 81 1,2 33 48 22,2 401 2,3 320 81 1,1 33 48 20,2Leases and instalment debtors 308 1,9 101 207 3,0 192 15 67,2 351 2,0 127 224 3,0 200 24 63,8Card 9 0,1 1 8 0,1 8 88,9 5 <0,1 1 4 0,1 4 80,0Properties in possession 9 0,1 9 16 0,1 16Other loans and advances 633 4,0 348 285 4,3 246 39 45,0 629 3,5 351 278 3,7 249 29 44,2

Nedbank Retail 10 179 64,2 5 147 5 032 73,7 4 539 493 49,4 11 402 63,9 5 782 5 620 75,2 4 927 693 49,91

Residential mortgages 4 408 27,8 3 138 1 270 18,6 1 137 133 28,8 5 230 29,3 3 671 1 559 20,8 1 409 150 29,8Commercial mortgages 34 0,2 15 19 0,3 18 1 55,9 29 0,2 13 16 0,2 15 1 55,2Leases and instalment debtors 1 949 12,3 905 1 044 15,3 988 56 53,62 2 022 11,3 740 1 282 17,2 1 184 98 67,01

Card 892 5,6 50 842 12,3 832 10 94,4 824 4,6 52 772 10,3 762 10 93,7Personal Loans 2 502 15,8 853 1 649 24,1 1 357 292 65,9 2 828 15,8 1 073 1 755 23,5 1 322 433 62,1Properties in possession 167 1,1 167 242 1,4 212 30 0,4 30 12,4Other loans and advances 227 1,4 19 208 3,1 207 1 91,6 227 1,3 21 206 2,8 205 1 90,7

Nedbank Wealth 599 3,8 456 143 2,1 18 125 23,9 525 2,9 384 141 1,9 17 124 26,9Residential mortgages 410 2,6 314 96 1,4 (29) 125 23,4 366 2,1 283 83 1,1 (41) 124 22,7Commercial mortgages 139 0,9 98 41 0,6 41 29,5 130 0,7 78 52 0,7 52 40,0Leases and instalment debtors 10 0,1 8 2 2 20,0 5 <0,1 1 4 0,1 4 80,0Properties in possession 32 0,2 32 16 0,1 16Other loans and advances 8 0,1 4 4 0,1 4 50,0 8 <0,1 6 2 2 25,0

Rest of Africa Division 222 1,4 117 105 1,5 105 47, 3 181 1,0 95 86 1,1 86 47,5Residential mortgages 68 0,4 47 21 0,3 7 14 30,9 58 0,3 44 14 0,2 (1) 13 24,1Commercial mortgages (7) 7 6 6Leases and instalment debtors 35 0,2 14 21 0,3 3 18 60,0 24 0,1 6 18 0,2 (5) 13 75,0Card 2 <0,1 1 1 1 50,0 1 <0,1 1 <0,1 1Personal Loans 34 0,2 12 22 0,3 (3) 25 64,7 19 0,1 (1) 20 0,3 1 21 105,3Other loans and advances 83 0,5 43 40 0,6 40 48,2 79 0,5 46 33 0,4 (1) 32 41,8

Centre 14 (14) (0,2) (14) 17 (17) (0,2) (17)Other loans and advances 14 (14) (0,2) (14) 17 (17) (0,2) (17)

Nedbank Group 15 846 100,0 9 014 6 832 100,0 5 673 1 159 43,1 17 848 100,0 10 378 7 470 100,0 6 214 1 256 42,31

Residential mortgages 5 649 35,6 4 040 1 609 23,5 1 257 352 28,5 6 613 37,1 4 701 1 912 25,6 1 532 380 28,9Commercial mortgages 1 959 12,4 1 400 559 8,2 254 305 28,5 2 050 11,5 1 572 478 6,4 268 210 23,3Leases and instalment debtors 2 309 14,6 1 032 1 277 18,7 1 188 89 55,3 2 423 13,6 889 1 534 20,5 1 399 135 66,31

Card 903 5,7 52 851 12,4 840 11 94,2 830 4,7 53 777 10,4 766 11 93,6Personal loans 2 536 16,0 865 1 671 24,5 1 354 317 65,9 2 847 16,0 1 072 1 775 23,8 1 321 454 62,3Properties in possession 596 3,8 596 772 4,3 742 30 0,4 30 3,9Other loans and advances 1 894 11,9 1 029 865 12,7 780 85 45,7 2 313 13,0 1 349 964 12,9 898 66 41,7

1 Restated due to the reclassification of restructures in MFC as defaulted advances.2 Restated defaulted restructured accounts and related provisions which were incorrectly classified in Dec 2013 as performing and have now been correctly classified as defaulted to better reflect the underlying nature. There was a




35c

Defaulted advances, specific impairments and specific-coverage ratio by business cluster and product2014 2013

Defaulted loansand advances

Expected recoveries Specific impairments

Specific-coverage

ratioDefaulted loans

and advancesExpected

recoveries Specific impairments

Specific- coverage

ratio

RmAs %

of total Rm RmAs %

of total


Rm

Fordiscounted

cashflowlosses

Rm % RmAs %

of total Rm RmAs %

of total


Rm

Fordiscounted

cashflowlosses

Rm %

Nedbank Capital 209 1,3 110 99 1,4 98 1 47,4 661 3,7 338 323 4,3 320 3 48,9Other loans and advances 209 1,3 110 99 1,4 98 1 47,4 661 3,7 338 323 4,3 320 3 48,9

Nedbank Corporate 2 550 16,1 1 886 664 9,7 411 253 26,0 2 745 15,4 2 263 482 6,5 323 159 17,6Residential mortgages 27 0,2 19 8 0,1 5 3 29,6Commercial mortgages 1 421 9,0 1 003 418 6,1 169 249 29,4 1 490 8,3 1 161 329 4,4 174 155 22,1Leases and instalment debtors 7 <0,1 4 3 3 42,9 21 0,1 15 6 0,1 6 28,6Properties in possession 388 2,4 388 498 2,8 498Other loans and advances 734 4,6 491 243 3,6 239 4 33,1 709 4,0 570 139 1,9 138 1 19,6

Nedbank Business Banking 2 087 13,2 1 284 803 11,8 621 182 38,5 2 334 13,1 1 499 835 11,2 644 191 35,8Residential mortgages 763 4,8 541 222 3,2 142 80 29,1 932 5,2 684 248 3,3 158 90 26,6Commercial mortgages 365 2,3 284 81 1,2 33 48 22,2 401 2,3 320 81 1,1 33 48 20,2Leases and instalment debtors 308 1,9 101 207 3,0 192 15 67,2 351 2,0 127 224 3,0 200 24 63,8Card 9 0,1 1 8 0,1 8 88,9 5 <0,1 1 4 0,1 4 80,0Properties in possession 9 0,1 9 16 0,1 16Other loans and advances 633 4,0 348 285 4,3 246 39 45,0 629 3,5 351 278 3,7 249 29 44,2

Nedbank Retail 10 179 64,2 5 147 5 032 73,7 4 539 493 49,4 11 402 63,9 5 782 5 620 75,2 4 927 693 49,91

Residential mortgages 4 408 27,8 3 138 1 270 18,6 1 137 133 28,8 5 230 29,3 3 671 1 559 20,8 1 409 150 29,8Commercial mortgages 34 0,2 15 19 0,3 18 1 55,9 29 0,2 13 16 0,2 15 1 55,2Leases and instalment debtors 1 949 12,3 905 1 044 15,3 988 56 53,62 2 022 11,3 740 1 282 17,2 1 184 98 67,01

Card 892 5,6 50 842 12,3 832 10 94,4 824 4,6 52 772 10,3 762 10 93,7Personal Loans 2 502 15,8 853 1 649 24,1 1 357 292 65,9 2 828 15,8 1 073 1 755 23,5 1 322 433 62,1Properties in possession 167 1,1 167 242 1,4 212 30 0,4 30 12,4Other loans and advances 227 1,4 19 208 3,1 207 1 91,6 227 1,3 21 206 2,8 205 1 90,7

Nedbank Wealth 599 3,8 456 143 2,1 18 125 23,9 525 2,9 384 141 1,9 17 124 26,9Residential mortgages 410 2,6 314 96 1,4 (29) 125 23,4 366 2,1 283 83 1,1 (41) 124 22,7Commercial mortgages 139 0,9 98 41 0,6 41 29,5 130 0,7 78 52 0,7 52 40,0Leases and instalment debtors 10 0,1 8 2 2 20,0 5 <0,1 1 4 0,1 4 80,0Properties in possession 32 0,2 32 16 0,1 16Other loans and advances 8 0,1 4 4 0,1 4 50,0 8 <0,1 6 2 2 25,0

Rest of Africa Division 222 1,4 117 105 1,5 105 47, 3 181 1,0 95 86 1,1 86 47,5Residential mortgages 68 0,4 47 21 0,3 7 14 30,9 58 0,3 44 14 0,2 (1) 13 24,1Commercial mortgages (7) 7 6 6Leases and instalment debtors 35 0,2 14 21 0,3 3 18 60,0 24 0,1 6 18 0,2 (5) 13 75,0Card 2 <0,1 1 1 1 50,0 1 <0,1 1 <0,1 1Personal Loans 34 0,2 12 22 0,3 (3) 25 64,7 19 0,1 (1) 20 0,3 1 21 105,3Other loans and advances 83 0,5 43 40 0,6 40 48,2 79 0,5 46 33 0,4 (1) 32 41,8

Centre 14 (14) (0,2) (14) 17 (17) (0,2) (17)Other loans and advances 14 (14) (0,2) (14) 17 (17) (0,2) (17)

Nedbank Group 15 846 100,0 9 014 6 832 100,0 5 673 1 159 43,1 17 848 100,0 10 378 7 470 100,0 6 214 1 256 42,31

Residential mortgages 5 649 35,6 4 040 1 609 23,5 1 257 352 28,5 6 613 37,1 4 701 1 912 25,6 1 532 380 28,9Commercial mortgages 1 959 12,4 1 400 559 8,2 254 305 28,5 2 050 11,5 1 572 478 6,4 268 210 23,3Leases and instalment debtors 2 309 14,6 1 032 1 277 18,7 1 188 89 55,3 2 423 13,6 889 1 534 20,5 1 399 135 66,31

Card 903 5,7 52 851 12,4 840 11 94,2 830 4,7 53 777 10,4 766 11 93,6Personal loans 2 536 16,0 865 1 671 24,5 1 354 317 65,9 2 847 16,0 1 072 1 775 23,8 1 321 454 62,3Properties in possession 596 3,8 596 772 4,3 742 30 0,4 30 3,9Other loans and advances 1 894 11,9 1 029 865 12,7 780 85 45,7 2 313 13,0 1 349 964 12,9 898 66 41,7

1 Restated due to the reclassification of restructures in MFC as defaulted advances.2 Restated defaulted restructured accounts and related provisions which were incorrectly classified in Dec 2013 as performing and have now been correctly classified as defaulted to better reflect the underlying nature. There was a


36c


CREDIT CONCENTRATION RISK ■ Unmanaged risk concentrations are potentially a cause of major

problems in banks. Concentration risk is therefore considered separately as part of Nedbank’s Risk Appetite Framework.

Single-name credit concentration risk ■ Of the total group credit economic capital, only 5,1% (2013: 6,7%) is

attributable to the top 20 largest exposures, excluding banks and government exposure, and 1,2% (2013: 4,3%) to the top 20 banks’ largest exposures in 2014, highlighting that Nedbank Group does not have material single-name credit concentration risk.

� This decrease primarily relates to the acquisition of an approximate 20% stake in Ecobank Transnational Incorporated (ETI), which replaced the credit exposure.

■ Direct exposure to the SA government relates mainly to statutory liquid-asset requirements, and Basel III liquidity buffers, and constitutes 8,3% (2013: 6,2%) of total balance sheet credit exposure.

� The increase relates to the buildup of high-quality liquid assets (HQLA). Nedbank’s HQLA purchase plan target was accomplished by 31 December 2014, meaning that the total HQLA portfolio target was achieved ahead of the LCR go-live date of 1 January 2015.

■ The group’s credit concentration risk measurement incorporates the asset size of obligors/borrowers into its calculation of credit economic capital. Single-name credit concentration, including the applicable regulatory and economic capital per exposure, is monitored at all credit committees within the group’s Enterprisewide Risk Management Framework.

INDUSTRy CONCENTRATION RISK% of total gross loans and advances by major credit portfolio

2010 2011 2012 2013 2014

Total residential mortgages

Card

Total commercial mortgages

Corporate Banking advances

Total mortgages

Business Banking (SME)advances

Total motor vehicle finance

Investment Banking advances

Total personal loans

%

29,9

17,6

47,5

10,5

2,7

1,614

,310

,77,

7

27,4

18,2

45,6

11,0

3,5

1,714

,911

,88,

8

25,3

18,2

43,5

11,2

4,3

1,814

,411

,49,

1

23,0

18,0

41,0

11,0

3,6

1,913

,810

,811

,3

22,0

19,8

41,8

11,6

2,9

2,1

14,0

10,8

11,8

■ Nedbank has adopted a selective origination, client-centred growth emphasis as a core part of its strategic portfolio tilt strategy.

■ Nedbank’s approach to managing its mortgages (or property portfolio) is to take a holistic approach across both residential and commercial mortgages, preferring a dominant market share in commercial mortgages given the significantly better risk-based economics and returns.

� Commercial-mortgage lending has increased moderately over the past four reporting periods to 19,8% of gross loans and advances, and consequently Nedbank Group has maintained its dominant local market share position, currently at 41,4%. This potentially high concentration is mitigated by good-quality assets, high level of collateral, a low average loans-to-value ratio (approximately 50%), the underpinning of corporate leases, and a highly experienced management team considered to be the leader in property finance in SA.

� While Nedbank has the smallest residential-mortgage portfolio among the local peer group at 14,5%, the contribution of these advances as a percentage of total gross loans and advances was still substantial at 22,0% in 2014 (2013: 23,0%).

� The focus since 2009 in Home Loans is on lending through our own channels and much less, compared with the industry, through mortgage originators. This enables a better quality risk profile, more appropriate risk-based pricing and therefore more appropriate returns, with a client-centric approach.

— When including residential mortgages, Nedbank’s total mortgage market share is in line with that of its peers at 21,4%.

■ Total retail motor vehicle finance exposure within Nedbank Group has increased from 10,5% in 2010 to 11,6% in 2014 of gross loans and advances, while current market share is approximately 29,5%, which is second of the big four banks in SA. Sound risk management principles are consistently applied by an experienced management team.

■ Given the current state of the market and the concerning health of the consumer, coupled with macroeconomic expectations, the Personal Loans portfolio is expected to remain relatively flat over the medium term, and hence has decreased further in terms of a percentage of total gross loans and advances to 2,9% (2013: 3,6%). It is now consistent with 2010 levels.

■ As a percentage of total gross loans and advances, Corporate Banking and Business Banking advances have not changed substantially since 2010, whereas Card and Investment Banking advances have increased from 1,6% in 2010 to 2,2% in 2014, and from 7,7% in 2010 to 11,8% in 2014.


37c

SECURITISATION RISK

■ Nedbank Group uses securitisation exclusively as a funding diversification tool and to add flexibility in mitigating structural liquidity risk. ■ The group currently has three traditional securitisation transactions and one asset-backed commercial paper (ABCP) programme:

� Greenhouse Funding (RF) Limited (Greenhouse I), a residential-mortgage-backed securitisation (RMBS) programme that was launched in December 2007 and refinanced in November 2012.

� Precinct Funding 1 (RF) Limited (Precinct), a commercial-mortgage-backed securitisation (CMBS) programme that was launched in March 2013. � Greenhouse Funding III (RF) Limited (Greenhouse III), a second standalone RMBS programme. In anticipation of the issuance of notes to the

capital market, a portfolio of eligible residential mortgages originated by Nedbank Retail was sold to the vehicle and funded by way of a warehousing facility from Nedbank. It is anticipated that the notes will be issued early in 2015 as part of the group’s funding plan.

� Synthesis Funding Limited (Synthesis), an ABCP programme that was launched during 2004.

Assets securitised and retained securitisation exposureAssets

securitised1Assets

outstandingAmount retained/

purchasedRisk-weighted

assets2

RmYear

initiatedRating

agencyTransaction

typeAsset

type 2014 2013 2014 2013 2014 2013 2014 2013

Greenhouse I 2007 FitchTraditional

securitisation Home loans 2 049 2 049 1 557 1 763 377 379 361 287

Precinct 2013 Moody’sTraditional

securitisation

Commercial property

loans 2 344 2 344 1 586 1 959 514 510 580 747

Greenhouse III 2014 UnratedTraditional

securitisation Home loans 962 962 967 2251 This includes all assets identified for securitisation at the transaction close.2 The regulatory capital held against these securitisation exposures is capped at the Internal Ratings-based (IRB) Approach capital that the bank would have held against the underlying assets had they not been securitised.

Liquidity facilities provided to Nedbank’s asset-backed commercial paper programme

RmYear

initiatedRating

agencyTransaction

typeAsset

typeProgramme

size

Synthesis 2004 Fitch ABCPprogramme

Asset-backedsecurities,

corporate termloans and

bonds

15 000

Face value of notes outstanding Liquidity facilities Risk-weighted assets1

Rm 2014 2013 2014 2013 2014 2013

Synthesis 3 291 5 125 3 293 5 128 698 1 0871 The regulatory capital held against these securitisation exposures is capped at the IRB capital that the bank would have held against the underlying assets had they not been securitised, subject to a 20% risk-weighting floor.

■ Nedbank Group did not issue any new securitisation transactions to the market during 2014; however, it remains a key part of the group’s funding strategy.

■ There have been no downgrades of any of the commercial paper or notes issued by Nedbank Group’s securitisation transactions and the performance of the underlying portfolios of assets remains sound.

■ Nedbank Group also fulfils a number of secondary roles as liquidity facility provider, hedge counterparty and investor to third-party securitisation transactions.

■ All securitisation transactions entered into thus far have involved the sale of the underlying assets to the special-purpose vehicles. Nedbank Group has not originated or participated in synthetic securitisations.

■ Nedbank Group complies with IFRS in recognising and accounting for securitisation transactions. � In particular, the assets transferred to the Greenhouse securitisation vehicles and the Precinct securitisation vehicle continue to be recognised

on the balance sheet of the bank and the securitisation vehicles are consolidated under Nedbank Group for financial reporting purposes, as is Synthesis.

� Securitisations are treated as sale transactions (rather than financing transactions). The assets are sold to the special-purpose vehicles at carrying value and no gains or losses are recognised.

38c

MARKET RISKS

■ Other than the interest rate risk in the banking book (IRRBB), Nedbank does not have a significant risk appetite for, or exposure to, market risk.

� Nedbank’s IRRBB is positioned for an upward interest rate cycle and is predominantly managed in line with impairment sensitivity for similar rate change expectations.

� The focus of the trading businesses is to continue to develop the flow model by leveraging the dealflow from clients.

— Proprietary trading has been significantly scaled down.

� Equity risk in the banking book, or investment risk, is low relative to the rest of the balance sheet. The main development in this area in 2014 was the strategic acquisition of 36,6% in Banco Único held at R286m and an approximate 20% stake in ETI held at R6 223m. These are accounted for under the equity method of accounting which total R6 772m.

� Foreign currency translation risk remains relatively low, even after the acquisition of equity stakes in ETI and Banco Único in 2014, with sensitivity of a 10% change in the value of the rand only having a 0,2% impact on the group’s total regulatory capital adequacy ratio (CAR).

Summary of Nedbank Group market risk profile2014 2013

Interest rate risk in the banking book (high) Net interest income (NII) sensitivity to 1% decline in interest rates (equal and opposite positive NII impact for an increase in interest rates) (Rm) (1 019)1 (936)1

NII sensitivity to 2% decline in interest rates (equal and opposite positive NII impact for an increase in interest rates) (Rm) (2 022)1 (1 821)1

% of ordinary shareholders’ equity (board limit: <2,25%)2 (%) 1,52 1,54Trading market risk (low) % of group minimum economic capital requirement (%) 1,1 1,2Total value at risk (VaR) (99%, one-day VaR) exposure (average) (Rm) 10,7 6,6Total stressed VaR exposure (99%, one-day VaR at the end of the period) (Rm) 24,2 20,0

Foreign currency translation risk (low) Impact on group’s total regulatory capital ratio for 10% change in the value of the rand (%) 0,2 0,1

Equity risk in the banking book (low) Total equity portfolio (Rm) 11 533 5 317Disclosed at fair value (Rm) 4 761 5 066Equity accounted (Rm) 6 772 251

% of total assets (%) 1,4 0,7

% of group minimum economic capital requirement (%) 6,9 3,71 Positioned for an upward interest rate cycle.2 Measured for a 1% decline in interest rates.

■ The contribution of equity risk in the banking book to the group’s minimum economic capital increased to 6,9% (2013: 3,7%) largely as a result of the acquisition of an approximate 20% stake in ETI driving a significant increase in investment exposure.

INTEREST RATE RISK IN THE BANKING BOOKNedbank Group is exposed to IRRBB, primarily due to the following:

■ The bank writes a large quantum of prime-linked advances. ■ To lengthen the funding profile of the bank term funding is raised across

the curve at fixed-term deposit rates that reprice only on maturity. ■ Three-month repricing swaps and forward rate agreements are typically

used in the risk management of term deposits and fixed-rate advances. ■ Short-term demand funding products reprice to different short-end

base rates. ■ Certain non-repricing transactional deposit accounts are

non-rate-sensitive. ■ The bank has a mismatch in net non-rate-sensitive balances, including

shareholders’ funds that do not reprice for interest- rate-changes.

IRRBB comprises:

■ Repricing risk (mismatch risk) – timing difference in the maturity (for fixed rate) and repricing (for floating rate) of bank assets, liabilities and off-balance-sheet positions.

■ Endowment risk – the net mismatch between non-rate-sensitive assets, liabilities, capital and non-repricing transactional deposit accounts effectively invested in rate-sensitive assets.

■ Reset or basis risk – imperfect correlation in the adjustment of the rates earned and paid on different instruments with otherwise similar repricing characteristics.

■ Yield curve risk – changes in the shape and slope of the yield curve. ■ Embedded optionality – the risk related to interest-related options

embedded in bank products.

Sensitivity analysis:

■ At December 2014 the NII sensitivity of the group’s banking book for a 1% parallel reduction in interest rates is 1,52% of total group ordinary shareholders’ equity (OSE) (2013: 1,54%), which is well within the board’s approved risk limit of 2,25%.


39c

■ This exposes the group to a decrease in NII of approximately R1 019m before tax should interest rates fall by 1%, measured over a 12-month period.

� NII sensitivity, as currently modelled, exhibits very little convexity and so also results in an increase in pretax NII of approximately similar amounts, should interest rates increase by 1%.

■ The group’s NII sensitivity is actively managed through on- and off-balance-sheet interest rate risk management strategies for the group’s expected interest rate view and impairment sensitivity.

■ Nedbank Limited’s economic value of equity (EVE), measured for a 1% parallel decrease in interest rates, remains at a low level of R105m at December 2014 (2013: R103m).

� The low level of EVE is the result of the group’s risk management strategies, whereby assets and liabilities are typically positioned to reprice in the <3-month repricing bucket and net working capital largely offsets the non-rate-sensitive transactional balances, thereby positioning OSE to reprice as interest rates change.

Nedbank Group interest rate repricing gap

Rm <3 months >3 months<6 months

>6 months<12 months >1 year

Non-rate- sensitive and trading book

2014Net repricing profile before hedging 44 092 593 (3 944) 40 987 (81 728)Net repricing profile after hedging 68 472 8 121 (2 674) 7 809 (81 728)

Cumulative repricing profile after hedging 68 472 76 593 73 919 81 728 –

2013Net repricing profile before hedging 60 325 (16 138) (20 083) 43 301 (67 405)Net repricing profile after hedging 51 659 11 253 (2 038) 6 531 (67 405)

Cumulative repricing profile after hedging 51 659 62 912 60 874 67 405 –

Nedbank Group interest rate repricing profileNEDBANK GROUP – INTEREST RATE RISK REPRICING PROFILE

Rm

<3 months >3 months<6 months

>6 months<12 months

>1 year Non-rate-sensitiveand trading book

Area of active hedging activity

*

*(80 000)

(50 000)

(20 000)

10 000

40 000

70 000

2013 − net repricing profile before hedging

2014 − net repricing profile before hedging

2013 − net repricing profile after hedging

2014 − net repricing profile after hedging

* Non-rate-sensitive capital, working capital and transactional deposit accounts expose the balance sheet to sensitivity as this net position is positioned to reprice in <3 months.

■ The Group Asset and Liability Committee (ALCO) typically has a strategic appetite out to one year and, largely as a matter of policy, eliminates reprice risk longer than one year, unless Group ALCO chooses to lengthen the investment profile of its equity and/or the non-repricing transactional deposit accounts in order to improve the alignment of interest rate sensitivity with impairment sensitivity or improve the balance sheet position for expected interest rate changes.

■ Nedbank Group’s interest rate repricing profile graphically represents the repricing of floating-rate assets and liabilities and maturity of fixed-rate assets and liabilities through a repricing time series. The net repricing profile before hedging clearly highlights the following:

� Asset sensitivity in the <3-month repricing bucket as a result of primarily prime-linked advances.

� Liability sensitivity in the >3-month and <12-month repricing buckets in 2013 largely as a result of fixed-rate term funding.

� Low sensitivity with >3-month and <12-month repricing buckets in 2014, as fixed-term funding is now being managed with on-balance-sheet treasury bills that are purchased as part of the group’s liquidity coverage ratio (LCR) high-quality liquid asset (HQLA) requirements.

� Asset sensitivity in the >1 year repricing bucket as a result of longer-dated fixed-rate advances and government securities.

■ The net repricing profile after hedging highlights the impact of hedging that better aligns the repricing of assets and liabilities across the curve.

■ The residual risk position consists of a net endowment position and short-term reprice risk between prime and the Johannesburg Interbank Agreed Rate (JIBAR) resets after hedging.

40c

MARKET RISKS (continued)

TRADING MARKET RISK ■ Most of Nedbank Group’s trading activity is managed in Nedbank Capital and is primarily focused on client activities and flow trading. This

includes marketmaking and the facilitation of client business in the foreign exchange, interest rate, equity, credit and commodity markets. ■ Since the publication of the second consultative paper on the Fundamental Review of the Trading Book (FRTB) in October 2013, Nedbank has

participated in two quantitative impact studies (QIS) during the course of 2014. Nedbank continues to assess the impact of the FRTB on its trading business, both from a capitalisation and operational perspective, and will continue to participate in the Basel Committee’s QIS in this regard during the course of 2015.

■ In addition to applying business judgement, management uses a number of quantitative measures to manage the exposure to trading market risk. These measures include:

� Risk limits based on a portfolio measure of market risk exposures referred to as VaR, including expected tail loss. � Scenario analysis, stress tests and other analytical tools that measure the potential effects on the trading revenue arising in the event of various

unexpected market events. ■ While VaR captures Nedbank Group’s exposure under normal market conditions, sensitivity and stress and scenario analyses are used to add

insight into the possible outcomes under abnormal market conditions. � Nedbank Capital uses a number of stress scenarios to measure the impact on portfolio values of extreme moves in markets, based on historical

experience as well as hypothetical scenarios. The stress-testing methodology assumes that all market factors move adversely at the same time and that no actions are taken during the stress events to mitigate risk, reflecting the decreased liquidity that frequently accompanies market shocks.

� Stress-testing results are reported daily to senior management and monthly to the Trading Risk Committee and Group ALCO. Stress scenarios are periodically and at least annually reviewed for relevance in ever-changing market environments.

Risk type

Trading book VaR Trading book stressed VaR

Historical VaR (99%, one-day VaR) Historical stressed VaR (99%, 10-day VaR)3

Average Minimum1 Maximum1 End of period Average Minimum1 Maximum1 End of period

January – December 2014Foreign exchange 3,7 0,6 10,7 0,9 41,1 3,5 103,2 4,5Interest rate 7,8 5,2 12,1 5,8 57,6 36,3 111,9 59,9Equity 2,0 0,6 5,7 1,1 14,8 2,2 45,7 8,0Credit 3,8 2,7 5,3 5,3 35,4 20,4 68,6 26,0Commodity 0,3 0,9 0,9 0,5 2,0 1,5

Diversification2 (6,9) (4,8) (60,8) (23,5)

Total VaR exposure 10,7 6,9 16,5 9,2 88,6 44,5 152,2 76,4

January – December 2013Foreign exchange 2,2 0,6 9,4 1,4 17,0 3,5 59,8 17,7Interest rate 4,5 2,6 11,1 11,1 44,0 22,6 81,0 67,0Equity 1,6 0,6 5,4 1,1 16,5 2,8 44,5 11,6Credit 3,2 2,4 4,7 2,8 22,7 13,9 29,7 21,1Commodity 0,4 3,0 0,1 1,2 0,2 9,0 0,2

Diversification2 (5,3) (5,7) (43,0) (54,2)

Total VaR exposure 6,6 4,1 11,4 10,8 58,4 31,9 105,2 63,41 The maximum and minimum VaR values reported for each of the different risk factors do not necessarily occur on the same day. As a result, a diversification number for the maximum and minimum values have been omitted from the table.2 Diversification benefit is the difference between the aggregate VaR and the sum of VaRs for the five risk types. This benefit arises because the simulated 99% one-day loss for each of the five primary market risk types occurs on different days.3 A summary of the 10-day 99% stressed VaR for 2013 and 2014. Stressed VaR has been calculated for regulatory purposes since 1 January 2012 [following approval from the South African Reserve Bank (SARB) in the 2011 Internal Model

Approach (IMA) review]. Stressed VaR is calculated weekly and is included on the daily BA325 and monthly BA320 that are submitted to SARB. It is calculated using a 99% confidence interval for a one-day holding period and then scaled to a 10-day holding period.

■ The year was characterised by an increase in volatility across the major risk types. Major uncertainties threatening the world economic outlook include the risks associated with the quantitative easing exit and normalisation of interest rates in the United States, the vulnerability in emerging economies to external shocks and domestic structural bottlenecks as well as the possible escalation of geopolitical tensions.

■ The average daily VaR exposures increased during the course of 2014, mainly driven by foreign exchange and interest rate risk factors. Foreign exchange VaR exposures increased in 2014 due to increased trading activity from the non-linear foreign exchange business, coupled with rand weakness against the major currencies in the second half of the year. Interest rate VaR exposures showed an increase of approximately 72% in 2014 on the back of growth in client activity. In addition, there was a general increase in interest rate volatility, as evidenced by the unexpected rate hike at the end of January 2014.

■ The graph on the next page illustrates the daily normal VaR for the 12-month period ended December 2014. Nedbank Group remained within the approved risk appetite and the VaR limits allocated by the board, which remain low, with trading market risk consuming only 1,1% and 1,6% of group economic capital and regulatory capital respectively.


41c

Nedbank Group vaR versus profit and loss for the 12-months ended December 2014 (99%, one-day vaR)

Dec 14Jan 14

Rm

NEDBANK GROUP VaR VERSUS PROFIT FOR THE 12 MONTHS ENDED DECEMBER 2014 (99%, ONE-DAY VaR)

Profit and loss One-day VaR

(20)

(10)

0

10

20

Nov 14Oct 14Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sep 14

Average VaR

■ VaR is an important measurement tool and the performance of the model is regularly assessed through backtesting. This is done by reviewing the daily VaR over a one-year period (on average 250 trading days) and comparing the actual and hypothetical daily trading revenue (including NII, but excluding commissions and primary revenue) with the VaR estimate, and counting the number of times the trading loss exceeds the VaR estimate.

� Nedbank had no backtesting exceptions in the period under review. ■ The year was characterised by a positive contribution from all business lines, which resulted in strong financial performance. ■ Nedbank Group’s trading businesses (including NII, commissions and primary revenue credited to Nedbank Group’s trading businesses) produced a

daily revenue distribution that is skewed to the profit side, with trading revenue being realised on 244 days out of a total of 249 days in the period. ■ The average daily trading revenue generated for the period, excluding revenue related to investment banking, was R8,9m (2013: R8,5m).

EQUITY RISK IN THE BANKING BOOK ■ Equity investments in the banking book are primarily undertaken by Nedbank Capital (Investment Banking) and by Nedbank Corporate

(Property Finance). Additional investments are undertaken as a result of operational or strategic requirements. ■ The Nedbank board sets the overall risk appetite and strategy of the group for equity risk, and business compiles portfolio objectives and

investment strategies for its investment activities. These address the types of investments, expected business returns, desired holding periods, diversification parameters and other elements of sound investment management oversight.

■ Key strategic investments (ETI and Banco Único) are accounted for under the equity method of accounting and are therefore not included in this fair-value disclosure. Equity investments that are accounted for under the equity method of accounting total R6 772m.

■ The total equity portfolio that is fair valued is R4 761m (2013: R5 066m). � A total of R2 862m (2013: R3 584m) of this portfolio is held for capital gain, while the balance predominantly comprises investments held for

operational purposes. ■ The total equity portfolio that is fair valued is a very small component of the group’s balance sheet, comprising only 0,6% of the group’s

total assets.

Publicly listed Privately held Total

Rm 2014 2013 2014 2013 2014 2013

Fair value disclosed in balance sheet1 635 826 3 229 3 390 3 864 4 216

Fair value disclosed in balance sheet2 635 826 4 126 4 240 4 761 5 0661 Excluding investments in private-equity associates, associate companies and joint arrangements.2 Including investments in private-equity associates, associate companies and joint arrangements.

Equity investments held for capital gain (private equity) reported in non-interest revenue

Nedbank Group Nedbank Capital Nedbank Corporate

Rm 2014 2013 2014 2013 2014 2013

Securities dealing 339 67 120 (91) 219 158

Investment income – dividends received 84 158 40 155 44 3

Total 423 225 160 64 263 161

Realised 434 192 100 155 334 37

Unrealised (11) 33 60 (91) (71) 124

Total 423 225 160 64 263 161

■ Equity investments held for capital gain are generally classified as ’fair-value through profit and loss‘, with fair-value gains and losses reported in NIR. The rest of the portfolio is generally classified as ’available for sale‘, with fair-value gains and losses recognised directly in equity.

42c

MARKET RISKS (continued)

FOREIGN CURRENCY TRANSLATION RISK IN THE BANKING BOOK ■ Foreign currency translation (FCT) risk is the risk that the bank’s exposures to foreign capital will lose value as a result of shifts in the exchange

rate. As Nedbank Group is a rand-reporting entity, its risk is in a strengthening of the rand. ■ The inclusion of foreign currency translation reserves (FCTR) in qualifying regulatory capital and reserves results in a supply of CET1 capital of

R1 615m for the group at 2014.

Nedbank Group offshore capital split by functional currency2014 2013

$m (US Dollar equivalent)Forex-

sensitiveNon-forex-

sensitive TotalForex-

sensitiveNon-forex-

sensitive Total

US dollar 696 696 153 153Pound sterling 153 153 150 150Swiss franc 1 1 1 1Malawi kwacha 5 5 4 4Mozambican metical 25 25

Other 559 559 551 551

Total 880 559 1 439 308 551 859

Limit 1 000 390

■ The forex-sensitive offshore capital limit was revised from US$390m to US$1bn in September 2014, in line with an increased forex risk appetite reflected in the decision to purchase an approximate 20% stake in ETI and 36,6% stake in Banco Único.

■ Equity in forex-sensitive foreign subsidiaries has increased by 186% from US$308m in 2013 to US$880m in 2014, mainly as a result of investments in ETI (US$525m) and Banco Único (US$25m), in line with the group’s Rest of Africa expansion strategy.

■ FCT risk remains relatively low and is aligned with the appropriate offshore capital structure of the group. The total RWA for the group’s foreign entities is R21bn, which is low at approximately 4,8% of total RWA.

■ The fact that FCTR qualifies as capital and total RWA for the group’s foreign entities is low, means that any foreign exchange rate movement will have a small effect on Nedbank Group’s capital adequacy.

COUNTERPARTY CREDIT RISK ■ Counterparty credit limits are set at an individual counterparty level and approved within the Group Credit Risk Management Framework.

Counterparty credit risk (CCR) exposures are reported and monitored at both a business unit and group level. There is continued emphasis on the use of credit risk mitigation strategies, such as netting and collateralisation of exposures. Nedbank Group and its large bank counterparties have International Swaps and Derivatives Association, International Securities Market Association and International Securities Lending Association master agreements as well as credit support (collateral) agreements in place to support bilateral margining of exposures.

■ Netting is applied only to the underlying exposures where supportive legal opinion is obtained as to the enforceability of the relevant netting agreement in the particular jurisdiction.

■ The Basel III regulatory standards for CCR contain significant enhancements. Included is the introduction of a standalone credit valuation adjustment (CVA) capital charge for potential loss due to deterioration in the credit quality of the over-the-counter (OTC) derivative counterparties. The CVA charge is adjusted for SARB-issued directive D14/2013, which allows a zero-risk weight for CVA in ZAR-based derivatives and derivatives with local counterparties pending the finalisation of a CCP for OTC derivatives in SA. However, in line with SA’s adopting of Basel III, and in agreement with the regulator, SA banks have decided to waive the zero-risk weight as of 1 April 2015, whereupon the capital requirement for CVA risk will change from 0% to the required capital requirements as per the Banks Act and the regulations. Currently, without the 0% risk weight, the CVA RWA impact is approximately R6,4bn.

■ Nedbank Group applies the Current Exposure Method (CEM) for Basel III CCR. The CEM results are also used as input into the economic capital calculations to determine credit economic capital.

■ The Basel Committee published a consultative document in June 2013, for comment in September 2013, entitled ‘the non-internal model method for capitalising CCR exposures’. The document proposes a new methodology that will replace the CEM and the Standardised Model with the intention of the following:

� Addressing the known deficiencies of both the CEM and the Standardised Model. � Minimising the discretion used by national authorities and banks, while helping both national authorities and banks to gain a better

understanding of banks’ risk profiles relating to derivatives exposures. � Improving the risk sensitivity of the capital framework significantly without creating undue complexity.

■ SA, as a member of the G20, has committed itself to OTC derivative reform aimed at reducing systemic risk and Nedbank is actively engaged with the industry and its regulators to achieve this objective.


43c

■ Wrong-way risk is identified and monitored in line with internal risk processes. No excessive wrong-way risk exists within Nedbank Group and is monitored by stress testing that is run on both a portfolio and counterparty level. Wrong-way risk is currently mitigated through the following mechanisms:

� The predominant use of cash collateralisation in order to mitigate CCR. � The low- or zero-margin thresholds with counterparties.

■ Potential collateral calls or postings are monitored with our various counterparties under a range of market movements and stress scenarios to provide senior management with a forward-looking view of future collateral requirements. Under a credit rating downgrade scenario, it is estimated that collateral placed would increase by less than US$61m.

■ The Fundamental Review of the Trading Book (FRTB) (second consultative document) confirmed that the CVA will continue to be calculated as a standalone capital charge under The Standardised Approach and the Advanced Approach.

Nedbank Group over-the-counter derivatives products2014 2013

RmNotional

valueGross positive

fair valueNotional

valueGross positive

fair value

Credit default swaps 36 742 1 102 36 326 257Embedded derivatives 4 4691 28 3 650 14Trading 32 273 1 074 32 676 243MarkIt iTraxx Europe 26 6542 1 044 27 261 234Third Party 5 6193 30 5 415 9

Equities 4 837 498 4 515 502Foreign exchange 301 581 7 445 174 990 3 223

Interest rates 565 216 8 567 834 800 9 897

Total 908 376 17 612 1 050 631 13 8791 Credit default swaps embedded in credit-linked notes issued by Nedbank Group whereby credit protection of R4 294m is purchased and R175m is sold.2 Trading positions MarkIt iTraxx Europe through the purchase (R13 327m) and sale (R13 327m) of credit protection.3 Trading positions third-party transactions through the purchase (R894m) and sale (R4 725m) of credit protection.

■ An increase in gross positive fair value from 2013 to 2014 was attributable to Nedbank’s increased trading activity in foreign exchange derivatives.

Nedbank Group over-the-counter derivative netting

Rm

Gross positive

fair value

Current netting

benefits

Netted exposure

(before mitigation) Collateral

Netted exposure

(after mitigation)

Exposure at default

Risk-weighted assets

2014 17 612 11 424 6 188 1 456 4 732 9 447 3 9291

2013 13 879 7 889 5 990 1 398 4 592 10 174 3 7942 1 Risk-weighted assets for 2014 consist of CCR of R3 093m and a CVA charge of R836m introduced in Basel III as per SARB-issued directive D14/2013.2 Risk-weighted assets for 2013 consist of CCR of R2 889m and a CVA charge of R905m introduced in Basel III as per SARB-issued directive D14/2013.

Nedbank Group securities financing transactions

Rm

Gross positive

fair value

Collateral value after

haircut

Netted current

credit exposure

(after mitigation)

Exposure atdefault

Risk-weightedassets

2014Repurchase agreements 18 291 17 229 1 062 1 062 163

Securities lending 9 868 14 491 890 890 468

Total 28 159 31 720 1 952 1 952 631

2013Repurchase agreements 25 796 24 618 1 177 1 186 106

Securities lending 5 789 10 497 715 715 87

Total 31 585 35 115 1 892 1 901 193

44c

OPERATIONAL RISK ■ The top and emerging operational risk themes for 2014 were conduct risk, cybercrime, fraud, information technology risk and the regulatory

environment, and are likely to remain the leading topical emerging operational risks for 2015, together with the electricity supply constraints in SA. ■ Globally, the levels of operational risk capital are increasingly under scrutiny, given the frequency and severity of operational risk losses that have

been witnessed. Nedbank’s robust governance review process ensures that the bank continues to scan the environment and update scenario inputs to ensure that the group remains adequately capitalised.

■ The implementation of a second generation Advanced Measurement Approach model, including a review of methodology and technology, continues to receive focus.

■ A low percentage of operational risk loss experienced to gross operating income was maintained. All single material loss events of more than R5m are reported to the Group Risk and Capital Management Committee (GRCMC) and have been of a similar volume, when compared to that of 2013.

■ External fraud and transaction processing remained the main reasons for internal losses by frequency and severity.

Nedbank Group operational risk gross loss profile from internal loss data%

NEDBANK GROUP OPERATIONAL RISK GROSS LOSS PROFILE FROM INTERNAL LOSS DATA

2014

%

2013

238

10

13

37

Execution, delivery and process management

External fraud

Clients, products and business practices

Business disruption and system failure

Other

4

40

43

49

Significant operational risk events ■ In 2014 the execution, delivery and process management event-type category’s contribution to the operational risk loss profile increased to 40%

(2013: 38%). ■ During the year Nedbank received an administrative sanction of R25m (an execution, delivery and process management event-type) in terms of

the Financial Intelligence Centre Act (FICA) and a directive to take remedial action to address specific areas of deficiencies. Similar fines and directives were received by all the major SA banks for a collective amount of R125m.

■ Significant positive strides have been made with respect to the remedial actions to address the weaknesses raised in identifying and verifying clients’ FICA-required details and inadequacies, which were noted in the controls and systems relating to the detection of property associated with terrorist and related activities. Nedbank Group remains focused on internal and regulatory compliance, manages existing risks and proactively reviews and responds to new regulations to minimise exposure.

■ External fraud increased materially to 49% (2013: 37%) over the reporting period, as a result of a single significant robbery incident that was experienced during the period, causing a spike in the external fraud gross loss position. The amount of the robbery incident was, however, fully recovered.

• Analyst COVER 2014 • 20 February 2015 7:40 PM

COMPANY detailsnedbank grOup limitedIncorporated in the Republic of SA Registration number 1966/010630/06

Registered addressNedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, 2196, Johannesburg PO Box 1144, Johannesburg, 2000

Transfer secretaries in SAComputershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001, SA PO Box 61051, Marshalltown, 2107, SA

NamibiaTransfer Secretaries (Pty) Ltd, Shop 8, Kaiser Krone Centre, Post Street Mall, Windhoek, Namibia PO Box 2401, Windhoek, Namibia

instrument cOdesNedbank Group ordinary sharesCompany Secretary: TSB Jali Reg no: 1966/010630/06 JSE share code NED NSX share code NBK ISIN code ZAE000004875 Sponsors in SA: Merrill Lynch SA (Pty) Ltd

Nedbank Capital

Sponsor in Namibia: Old Mutual Investment Services (Namibia) (Pty) Ltd

Nedbank Limited non-redeemable, non-cumulative preference sharesJSE share code NBKP ISIN code ZAE000043667

This announcement is available on the group’s website at nedbankgroup.co.za, together with the following additional information:

■ Detailed financial information in HTML and PDF formats.

■ Financial results presentation to analysts.

■ Link to a webcast of the presentation to analysts.

For further information please contact Nedbank Group Investor Relations at [email protected].

registered OfficeNedbank Group Limited Nedbank 135 Rivonia Campus, 135 Rivonia Road, Sandown, 2196, Johannesburg PO Box 1144, Johannesburg, 2000

transfer secretaries in saComputershare Investor Services (Pty) Ltd 70 Marshall Street, Johannesburg, 2001, SA PO Box 61051, Marshalltown, 2107, SA

transfer secretaries in namibiaTransfer Secretaries (Pty) Ltd Robert Mugabe Avenue No 4, Windhoek, Namibia PO Box 2401, Windhoek, Namibia

These results and additional information are available on the Nedbank Group website at

nedbankgroup.co.za

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