NEDBANK CAPITAl - Nedbank Group Limited

OVERVIEWReview of 2009The difficult trading conditionsexperienced in the latter stages of 2008continued into the first half of 2009.However, trading conditions started toimprove in the second half of the year.The environment of lower interest ratesresulted in an improvement in retailaccounts in arrears and a reductionin the high level of impairmentsexperienced in the first half of the year,enabling Imperial Bank to increase netprofit after tax by 19,3% toR430,8 million. Return on equity was13,2% and the efficiency ratio at 28,0%was similar to that achieved in theprevious year. Loans and advances grew12,8% from R44,7 billion toR50,4 billion as Imperial Bankcontinued to attract good-quality newbusiness. The credit loss ratio at 1,97%(2008: 1,71%) is expected to decreaseas recoveries and accounts in arrearscontinue to improve.Motor Finance Corporation (MFC)performed well and increased netprofit after tax by 92,5% fromR164,5 million to R316,6 million, whileloans and advances grew 16,1% fromR28,0 billion to R32,5 billion. MFC wasable to continue generating goodqualitybusiness, predominantly in theused-car market at appropriate pricing,while maintaining strong risk controlsand a lean operating environment.As anticipated, Property Finance hashad a difficult year owing to the lackof demand for residential developmentfinance. As a result, loans and advancesgrew 11,3% from R8,0 billion toR8,9 billion. This change in business mixaway from residential developmentfinance resulted in lower net interestincome, which dropped 25,9%from R328,1 million last year toR243,2 million for the current year. This,combined with an increase of 218% inimpairments from R13,3 million lastyear to R42,3 million for the currentyear, resulted in net profit after taxdeclining 36,7% from R164,0 million for2008 to R103,8 million for 2009.Professional Finance had a muchimproved year with net profit after taxincreasing 42,7% from R17,8 millionlast year to R25,4 million for the currentyear. This was largely attributableto improved margins, excellent costmanagement and a slight reduction inimpairments, which were down 3,4%from R26,7 million in 2008 toR25,8 million for the year under review.Loans and advances increased 16,3%from R4,9 billion last year to R5,7 billionfor the current year.Supplier Asset Finance had adisappointing year, with the divisionbeing badly affected by the pooreconomic environment. The divisionincurred a loss of R12,7 million for theyear compared with a profit after tax ofR37,3 million last year. This was mainlydue to impairments that increased201,7% from R29,2 million last year toR88,1 million for the current year. Inline with the strategy to consider newbusiness selectively loans and advancesdeclined from R3,7 billion at31 December 2008 to R3,3 billion at31 December 2009.ProspectsThe improved trading conditionsexperienced during the second halfof the year are expected to continueinto 2010. However, the economicrecovery is fragile and there is continueduncertainty that could negatively impacton the business and particularly thecorporate and commercial businesses.Since the initial announcements ofthe merger of Imperial Bank, thegroup has invested significantly in theplanning of the integration to ensurea smooth transition in line with ourvalues and guided by legislation and fairemployment practices.GOVERNANCEGROUP REPORTSOPERATIONAL REVIEWS75NEDBANK GROUP ANNUAL REPORT 2009