NEDBANK CAPITAl - Nedbank Group Limited

IntroductionThe performance of Nedbank Groupover the past year should be evaluatedin the context of one of the toughestperiods experienced by the bankingsector locally and globally in manydecades.While the performance is down on2008, the results are in line withmanagement’s expectations and theguidance provided to the market inthe third quarter trading update. Itis therefore pleasing to report thatNedbank Group has remained solidlyprofitable, strengthened its capitalposition and, importantly, continued toincrease tangible net asset value.The global and domestic bankingconditions, as well as Nedbank Group’sresponse to the challenges over thepast year, have been outlined in theChairman’s and Chief Executive’sReports respectively.Financial targetsThe group achieved three of its sevenmedium-to-long-term financial targets,notably the capital adequacy ratio,economic capital and dividend coverlevels.The return on ordinary shareholders’equity (ROE) decreased as a resultof increasing retail impairment levelsand the negative impact from lowerendowment earnings that reducedthe return on assets, togetherwith strengthened capital levelsas shareholders’ equity growth farexceeded growth in total assets.Reporting changesNedbank Business Banking is a highgrowtharea for the group and becauseof its strategic importance was madea separate cluster in 2009, havinghistorically been a division of NedbankCorporate.The acquisition of the remaining sharesin Nedgroup Life Assurance Company(NedLife), BoE Private Clients andFairbairn Private Bank (the previous jointventures with Old Mutual) has beenpositive for the group. These assets,previously accounted for as associates,together with other insurance andwealth management businesses, led tothe creation of a Bancassurance andWealth business cluster in August 2009.This cluster will report separately from2010, and its seven-month performancein 2009 is included in Nedbank Retail.Imperial Bank is reported on separatelyfor the last time in the current period,as the remaining 49,9% shareholdingwas acquired by the group and thetransaction approved in February 2010.This business will be fully consolidatedand integrated into the Nedbank Retail,Nedbank Business Banking, NedbankCorporate and Nedbank Bancassuranceand Wealth clusters respectively.During the year the group commenceda project known as the Financial ControlInitiative (FCI), which forms part ofthe group initiatives of Old Mutualplc. FCI aims to promote a soundfinancial reporting culture throughan effectively managed financial riskand control environment. FCI enablesrisk management to become part ofeveryone’s role and purpose, withstaff and managers able to explainand show on a consistent basis howthey effectively use controls in theirbusiness to mitigate the risk of materialmisstatement of financial information.This initiative fulfils regulatory andgovernance requirements aroundfinancial reporting and controls asrequired by King III and the newCompanies Act, among others.Financial reportingNedbank Group continues to strivefor best-practice communication withthe investor community. This wasacknowledged when the group wasranked as the overall winner and first inthe banks/financial services category inthe Investment Analysts Society Awardsfor best reporting and communication.The Nedbank Group Annual Reportimproved its ranking to third out of thetop 100 companies listed on JSE Limitedat Ernst & Young’s 2009 Excellencein Corporate Reporting Awards. Thisranking is adjudicated by the accountingdepartment of the University of CapeTown in conjunction with Ernst & Young.GROUP REPORTSGOVERNANCEOPERATIONAL REVIEWSOVERVIEW85NEDBANK GROUP ANNUAL REPORT 2009