NEDBANK CAPITAl - Nedbank Group Limited

isk and BALANCE SHEET management reportSecuritisation riskNedbank Group entered the securitisation market during 2004 and currently has three securitisation transactions, Synthesis FundingLimited (Synthesis), an asset-backed commercial paper programme (ABCP) launched during 2004, Octane ABS 1 (Pty) Limited (Octane),a securitisation of motor vehicle loans advanced by Imperial Bank Limited through its subsidiary MFC that was launched in July 2007, andGreenHouse Funding (Pty) Limited (‘GreenHouse’), a residential mortgage-backed securitisation programme (‘RMBS Programme’) launchedin December 2007.Nedbank Group has used securitisation primarily as a funding diversification tool and has an established inhouse securitisation team withinNedbank Capital.The contraction in the local and international securitisation markets experienced in 2008 continued in 2009. As a result the group did notimplement new securitisations as an alternative source of funding over this period. Amidst the difficult external environment, althoughcredit quality deteriorated, all securitisation vehicles continued to perform well and the ratings of the various transactions have beenaffirmed by the rating agencies and remain stable.During the last quarter of 2009 arrears levels in GreenHouse exceeded the arrears trigger as a result of the deterioration in underlying assetperformance. In the event that the arrears levels continue to exceed the arrears trigger at the first determination date in 2010, no furtherhome loans (other than servicing redraws – ie access facilities on existing GreenHouse loans) can be acquired for as long as the arrears levelremains above the arrears trigger level, and all capital repayments will be directed to the noteholders. However, Nedbank Group decided, inthe interest of the noteholders, to exercise its discretion and not make further loans available for purchase by GreenHouse from December2009, rather than waiting until the first determining date in 2010.With regard to Octane, the transaction has started to repay investors in the normal course, as envisaged in the transaction documents.The group’s securitisation initiatives are overseen by the Group Asset and Liability Committee (ALCO) and Executive Risk Committee. Allsecuritisation transactions are also subject to the stringent SA Regulatory Securitisation Framework.From an IFRS accounting perspective the assets transferred to GreenHouse and Octane vehicles continue to be recognised and consolidatedin the balance sheet of the group. Synthesis is also consolidated into Nedbank Group.On-balance-sheet securitisation exposureTransactionRmYearinitiatedGreenHouse 2007RatingagencyMoody’sand FitchTransactiontypeTraditionalsecuritisationAssettypeAssetssecuritised2009 2008AssetsoutstandingAmountretained/purchasedAssetssecuritisedAssetsoutstandingAmountretained/purchasedRetailmortgages 2 000 1 973 226 2 000 1 972 226TraditionalOctane 2007 Fitchsecuritisation Auto loans 1 852 1 672 312 2 000 1 781 312Total 3 852 3 645 538 4 000 3 753 538Off-balance-sheet securitisation exposureTransactionRm Transaction type Exposure typeOwn transactionsExposure2009 2008Synthesis ABCP conduit Liquidity facility 5 824 7 806Third partiesPrivate Residential Mortgages (Pty) Limited Securitisation Liquidity facility 100 100Private Mortgages 2 (Pty) Limited Securitisation Liquidity facility 40 40Private Mortgages 2 (Pty) Limited Securitisation Redraw facility 428 436Total 6 392 8 382158NEDBANK GROUP ANNUAL REPORT 2009