Detailed Report - Nedbank Group Limited

AffordableHousing–MortgagesTheenvironmentformortgagelendingintheaffordablehousingmarketcontinuedtobetoughin2011.Althoughdemandforcreditremainedrelativelystrong,thecontinuedrestrictivelendingpoliciesinresponsetotheongoingglobaleconomiccrisisledtorelativelyhighdeclinerates.This prudent policy has resulted in only good risk, well priced loans being written although with the result thatmarketsharehassuffered.ThevalueofloansoriginatedfromJanuary2011toDecember2011declinedby31%whencomparedtothesameperiodin2010.Poorcredithistoryandaffordabilitycontinuetobethebiggesthurdlesforclientapprovals.ThecostofanentrylevelhouseisintheregionofR300000,whichrequiresamonthlyincomeofaroundR10300toqualifyfora20yearmortgage.InthiscasethemonthlyhomeloaninstalmentwouldbeR3100amonth.Therearethesignsthatthesupplyofnewhousingmaybeimproving.Thisisdemonstratedbythe13.9%increaseinhousesbuiltthatarelessthan80m2,agoodproxyfortheaffordablehousingactivity,whencomparingSeptember2011yeartodatetothesameperiodfor2010.Fortunatelyclientscontinuetobeassistedbythelowinterestrateenvironmentandthenumberofclientsinarrearsreducedfurtherin2011.Theexpectationoflimitedinterestrateincreasesin2012maynegativelyimpactonthispositive trend and may also dampen demand. High unemployment levels continued to have an impact on theAffordableHousingbusiness,bothintermsofdefaultsandintermsofimpactedcreditrecordsfornewapplicants.Despite the significant efforts being made to increase the levels of mortgage lending for affordable housing weexpectthedifficulttradingconditionstocontinueinto2012.DevelopmentFinanceNedbankacknowledgesthegrowingneedforfocused,specialisedfundingofnewaffordablehousingdevelopmentstoincreaseaccesstohousingforthebroadsegmentofSouthAfricanswhoareinthelowerincomesegments.Inthisregard the Affordable Housing division within the Property Finance Division has leveraged on the momentumachieved in this business during 2009/10 to provide further funding of more than R297M during 2011 for newaffordablehousingdevelopmentsinthemajormetrosacrossSouthAfrica.InthisfundingapproachwehavealsoacknowledgedthefactthatincomeearnersbelowR12,000permonthareunable to afford entry level affordable housing. Taking this into regard Nedbank has supported by way of aresponsivefundingapproachitsaffordablehousingdeveloperclients,whichenabledthemtoproducerentalstockthatcaterforthoseinthislowerincomesector.NedbankGroupTransformationReport2011–FinalDraft.51