NEDBANK GROUP LIMITED

Vehicle finance & the South African consumer

Trevor Browse, Managing Executive: Motor Finance Corporation

October 2014

MACRO-ECONOMIC

ENVIRONMENT

3

-12

-7

-2

3

8

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

30

35

40

45

50

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

GDP growth (%)

Vehicle Sales growth (%)

Rand/US$

Vehicle sales - impact of macro environment

Source: Nedbank Group Economic Unit

Strong correlation between passenger vehicle sales, GDP & R/US$ exchange rate

4

-10

0

10

20

30

40

04 06 08 10 12 14 16

Total credit excluding investments Hire Purchase & Leasing

Mortgages Other

Asset Based Finance Personal loans

Consumer health & credit demand

Credit demand by financing category

Source: Nedbank Group Economic Unit

Consumers remain under pressure

-6

-2

2

6

10

00 02 04 06 08 10 12 14

Consumer spending: q-o-q % change

Household disposable income: q-o-q% change

Credit growth (%)

Forecast for 2015 - 2017

VEHICLE FINANCE

INDUSTRY TRENDS

6

Vehicle finance – consumer affordability & the

increase in number of “finance schemes”

Factors influencing consumer’s purchasing decisions

Percentage of respondents that rated each topic as “extremely important’ or ‘very important’

Source: KPMG’s Global Automotive Executive Survey 2014

84%

83% 80%

80%

78%

60% 50%

48%

Brand

Competitive financing options

Warranty options

Responsiveness to

product recalls

Quick & conscientious

Responses to product recalls

Recommendations

On the internet/social media

Component financing

Financing of e-components

(if applicable)

Servicing options

During vehicle lifespan

Quality service experience

During purchase transaction

7

(45)

(30)

(15)

-

15

30

45

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

20000

30000

40000

50000

60000

70000

Vehicle sales growth (%) Total vehicle sales

New vehicle sales under pressure for the

foreseeable future

New vehicles sales similar to 2008 levels

Used car finance should not be underestimated

0.0

0.5

1.0

1.5

2.0

2.5

0

10 000

20 000

30 000

40 000

50 000

08 09 10 11 12 13

New Used Used/New Ratio

Source: TransUnion Credit Bureau

Source: Nedbank Group Economic Unit

(%) # Financial agreements

(%) # Vehicles

MFC OVERVIEW &

STRATEGY

9

MFC’s positioning in the Nedbank Group

Nedbank

Capital

Nedbank

Corporate

Nedbank

Business

Banking

Nedbank

Retail

Nedbank

Wealth

MFC Card Personal

Loans

Home

Loans

Retail

Relationship

Banking

Consumer

transactional

& deposits

Clu

ste

rs

Div

isio

ns

MFC

Rest of Retail

39%

61%

33%

67%

Assets Headline earnings

Fin

anci

al

met

rics

June 2014

11

MFC aligned to Group strategic focus areas

TO BE AFRICA’S MOST ADMIRED BANK

Client-centred innovation

Grow transactional

banking franchise

Optimiseand

invest

Strategic portfolio

tilt

Pan-African banking network

Strength

Opportunity

Opportunity

Strength

Opportunity

Strength

12

380 430

490 523 541

60 80

100 121 126

2010 2011 2012 2013 2014

Strong relationships with motor dealerships,

MFC’s primary channel, supports client growth

Motor dealership relationships Dealerships

• MFC Exco

• Head of sales

• Provincial Managers

Sustainable alliances with larger motor

groups

• 7 Provincial Managers

• 22 Regional Managers

Regular tactical

collaboration with dealer

partners

• 160 Dealer Relationship Managers

• 280 Credit Hub staff

• 230 Aftercare staff

Meeting the motor dealer’s

day to day needs

MFC’s dedicated motor dealer service

structure results in fast turnaround, swift

escalation, resolution & access to

decision-makers

# Clients

H1

(‘000)

# Clients with transactional products

23% (‘000)

16%

13

26,8 26,3

27,3 27,1 27,0 28,3 29,1

71,3

65,2 61,1 61,3

65,3

57,7 59,7 57,5

61,3

2008 2009 2010¹ 2011 2012 2013 2014

MFC VAF Total Retail

Efficient processes & excellent cost discipline

Consistently low efficiency ratios

Efficiency ratios (%)

H1

1: Imperial Bank was acquired in 2010 & MFC, a division of Imperial bank integrated with Vehicle Asset Finance (VAF), a division of Nedbank Retail

14

-25

61

177 209

280

379

518

Other CE RRB HL PL Card MFC

25,7 27,2

30,0

32,8

2011 2012 2013 2014

MFC a key growth area & earnings contributor

MFC vs Total Retail assets

(%)

Headline earnings

(Rm)

Asset mix change Relative earnings contribution

H1 2014 H1

¹

1: Personal loans HE is included in Consumer Transactional & Deposits but is shown as a separate product line in this graph

15

12,1

14,0 14,7

15,9 15,0

H1 H2 H1 H2 H1

Asset payouts driven by consumer demand &

pricing dynamics

2012 2013 2014 2012 2013 2014

Book growth YoY 12,5%

Asset payout slowing

2,42

2,49

2,36

2,41

2,30

H1 H2 H1 H2 H1

Competitive market forces

Pricing¹

(%)

Asset payout size

(Rbn)

16

12 14 13 14 13

90 101 107

119 117

Monthly average application & disbursals (# 000)

% Disbursals

10,6%

14,9%

3,5% 3,3%

7,0% 5,5%

9,0% 8,9%

PLs MFC Retail Total Prime

Well positioned for emerging consumer stress

PL defaults early credit distress indicator

Defaults by asset class

% of total advances

Coverage ratio

61,8% 58,6% 60,4% 67,0%

62,2%

H1 H2 H1 H2 H1

2012 2013 2014

Applications & disbursements

Credit loss ratio

1,00 1,10 1,15 1,26 1,30

H1 H2 H1 H2 H1

2012 2013 2014

(%) (%)

13,6% 13,5% 12,5% 12,0% 11,2%

17

MFC has grown into a key market player proving

an element of countercyclicality

Source: BA 900 (including securitisation)

Strong market share underpinned by strength in used cars

18

Outlook & prospects

Geared to interest

rate cycle

Cross-sell

insurance

Leveraging digital

channels

19

Self-service banking, opportunity to lower cost to serve & simplify processes

Successful HL app can be easily adapted for MFC requirements

Provides opportunity to cross-sell at the point of sale

Accessible to both dealers & clients

Leveraging digital channels

App suite downloads

‘000

Secure Approve-it transactions

# million

Digitally enabled clients

‘000

Source: Nedbank Retail analytics

20

Cross-sell insurance

Prior to acquisition, only one product was underwritten by Nedbank Group

− Today 7 products are underwritten by Nedbank Group

Currently sales of insurance is only through the aftersales team

Opportunity to cross-sell Nedbank underwritten products at point of sale

21

Favourable position for upward interest rate cycle

MFC new & used vehicles distribution over time relative to prime rate

Source: MFC value analytics

22

Summary & conclusion

Domestic

macro

environment

SA banking

industry

MFC

2014 GDP growth outlook 1,5% (downside risk from ongoing labour issues)

Inflation pressure from weaker currency

Repo rate started upward trajectory, but likely to be a lower rate cycle

Consumers under increasing pressure

New vehicle sales slowing

Low asset growth & margins under pressure

Consumer advances & transactional volume growth slowing, credit

pressures rising

Focus on bank fees & consumer protection

Well positioned for upward interest rate cycle

Excellent risk management

− Prudent disbursals, low CLR, high coverage ratios

Highly efficient business (low cost-to-income ratio)

Strong dealership relationships & net client gains

Growth opportunity – leverage digital channels & cross-sell insurance

THANK YOU

24

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.