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Programme

Programme. Highlights Richard Laubscher Financial review Stuart Morris Operational review Derek Muller Conclusion Richard Laubscher. Highlights Richard Laubscher Chief Executive. Highlights. Headline eps up 2 % to 630c Core eps up 1 7 % to 645c

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Programme

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  1. Programme • Highlights Richard Laubscher • Financial review Stuart Morris • Operational review Derek Muller • Conclusion Richard Laubscher

  2. HighlightsRichard LaubscherChief Executive

  3. Highlights • Headline eps up 2% to 630c • Core eps up 17% to 645c • South African profits up 21% to R1,3bn • International profits up 8% to R277m • Market share growth from 15,7% to 18,3% over 5 years

  4. Highlights (continued) • Margin down 17% (over 5 years) • Credit extension: advances up 14% • Flight to quality: domestic deposit growth 21% • Microlending: credit-based lending approach • Only genuine empowerment bank in Peoples Bank

  5. Six-year interim review 5 year CAGR % 18,8 16,6 3,1 1997 266 2839 100,50 19,9 1,40 4,05 41,7 61,7 2002 630 6112 117,00 20,9 1,70 3,05 48,5 53,4 HEPS (cents per share) NAV (cents per share) Share Price ROE (%) ROA (%) Margin (%) NIR (%) Expense/Income

  6. Strategy + + + + + ORGANIC (Market share) 18,3% 15,7% BoE (Market share) 23,3% 18,3% New Initiatives Bancassurance Capital One JD Group Pick ’n Pay Imperial Bank Old Mutual Bank International Gerrard Private Bank (Wealth Management Model) SwissCard Asian Trade Finance Synergies + +

  7. Financial ReviewStuart MorrisGroup Financial Director

  8. Key messages • Ongoing disclosure and transparency • Sustained core earnings growth • Core businesses performing well

  9. Disclosure & transparency • Speed of reporting • Materiality thresholds • Banking Council initiative • Options – fully diluted earnings • AC 133 – financial instruments

  10. Nedcor accounting issues • Translation gains/(losses) • Foreign entities – directly to reserves • Integrated operations – through income statement • “Normalised” • “Exceptional” • New exposure draft • Reversal of general risk provision • Computer development costs • Didata mark-to-market

  11. Rand depreciation R/USD

  12. Net interest income Non-interest revenue Total income Provisions Net income Expenses Net operating income Taxation Net income after taxation Associate income Minorities Core earnings Income statement: core earningssix months ended 30 June % change 2002 Rm 2001 Rm 10 2857 2604 26 2690 2141 17 5547 4745 13 560 494 17 4987 4251 16 2962 2550 19 2025 1701 – 404 402 25 1621 1299 (8) 92 100 (153) (82) 18 1560 1317

  13. Core earnings to headline earnings June 2002 Rm June 2001 Rm Dec 2001 Rm % change Core earnings 18 1560 1317 3 098 Translation gains/(losses) (436) 168 1096 General risk provision 400 – (400) Headline earnings 3 1524 1485 3794

  14. Net interest income Rm %

  15. % change 2002 Rm 16 1 761 80 670 64 236 26 2 690 (436) (2) 2 254 Non-interest revenue %mix 2001 Rm Commission and fees 78 1 520 Securities and exchange trading 30 373 Other 11 144 119 2 141 Translation (losses)/gains (19) 168 Total 100 2 309

  16. Provisions charged against income Rm %

  17. Non-performing loans June 2002 Dec 2001 June 2001 % % % Rm adv Rm adv Rm adv Non-performing loans 7 014 4,4 6 974 4,4 6 437 4,7 Expected recoveries 3 603 2,3 3 473 2,2 3 009 2,2 Expected losses 3 411 2,2 3 501 2,2 3 428 2,5 Provisions (coverage) 4 691 3,0 5 154 3,3 4 792 3,4 Adequacy of provisions – Gross coverage (%) 67 74 74 – Net coverage (%) 138 147 140

  18. Expenses Rm %

  19. Computer development costs • Total costs R714m (Dec 2001: R881m) • Capitalised in terms of AC129 • Projects approved per business case: • new products and services • client functionality • cost efficiencies • Represents >100 projects including: Credit card Credit risk CRM & CIS Treasury risk Branch efficiency Insurance

  20. Taxation Rm %

  21. Return on equity Rm %

  22. Return on assets % Rm

  23. Headline & core earnings Rm C

  24. Operational reviewDerek MullerManaging Director: Business Divisions

  25. By operation South Africa 209 Retail banking 95 107 91 Nedbank 507 15 118 Peoples Bank 28 92 416 Commercial banking 20 348 340 Nedbank 19 285 26 Imperial Bank * 30 20 50 Cape of Good Hope Bank 16 43 655 Corporate and Investment banking 13 578 470 Nedbank 10 429 185 Nedcor Investment Bank * 24 149 (42) T & O investments 40 (30) 45 Internal funding and group operations (21) 57 1283 21 1060 Segmental analysis June 2002 Rm % change June 2001 Rm

  26. International (including Africa) 65 Nedcor Bank 85 (24) 24 Gerrard Private Bank 5 380 188 Nedcor Investment Bank * 167 13 277 257 8 Core (excluding translation gains) 1560 1317 18 (36) Translation gains and exceptional items 168 (121) Statutory (including translation gains) 1524 1485 3 By geography 1283 South Africa 1060 21 91 Rest of Africa 116 (22) 186 Rest of the world 141 32 Core (excluding translation gains) 1560 1317 18 (36) Translation gains and exceptional items 168 (121) Statutory (including translation gains) 1524 1485 3 Segmental analysis(continued) June 2002 Rm % change June 2001 Rm

  27. Nedbank Retail(6% of core earnings) • Major increase in bottom line • Core expense growth of 2% before new ventures • Mortgage arrears down 41% over 18 months • Product growth rates: • Home loans 13% • Asset-based finance 28% • Card volumes 19%

  28. Peoples Bank(8% of core earnings) • Net income after tax up 28% • Total advances of R7,2bn • Conservative dynamic provisioning policy applied to microlending book

  29. Nedbank Commercial(22% of core earnings) • Net income after tax up 19% to R340m • Margin improvement • Deposits growth of 17% to R19,3bn • Expense growth 3%

  30. Cape of Good Hope Bank(3% of core earnings) • Net income after tax up 16% to R50m • Advances growth of 29% • Efficiency ratio of 41%

  31. Nedbank Corporate(30% of core earnings) • Net income after tax up 10% to R470m • Advances up 21% • Margin pressure offset by volume-driven non-interest revenue growth • Expenses growth of 18% – $-based costs and risk systems expenditure

  32. International(17% of core earnings) • International earnings up 8% to R277m • London up 4%. Hong Kong down • Singapore rapidly reaching breakeven • Good performance by Gerrard Private Bank • Nedbank Africa up 3% • Swisscard set-up costs of R4,5m

  33. ConclusionRichard LaubscherChief Executive

  34. BoE update • EPS effect • Pro forma HEPS growth of 10% – excluding potential synergies • Pro forma NAV growth of 7% • Work to date • Strong endorsement from shareholders • Capital structure optimised, gearing now in line with competitors • Management,operating and board structures announced • Izak Botha heading up integration with senior management team • International consultants reviewing integration plans • Client information and retention programme launched • Staff communications underway

  35. BoE update(continued) • Integration drivers • 8 Banking licenses to be reduced • Integration of: statutory entities into 4 operating clusters shared services systems and infrastructure risk management • Cost of Capital and performance measurement to be consistently introduced across group • Non-core and underperforming assets to be restructured or disposed of

  36. Conclusion • Historic core competency • Optimise business • Extract costs • Two year focus: • Integrate and optimise BoE • Restructure and optimise Nedcor (NIB & COGHB) • Additive • Strong core performance and new initiatives

  37. Questions

  38. Income statement analysis6 months ended 30 June 2002 2001 Alliances R’000 R’000 Net interest income 70 214 18 671 Non-interest revenue 126 655 70 075 Total income 196 869 88 746 Provisions 71 563 17 412 Net income 125 306 71 334 Expenses 171 878 112 218 Net operating income (46 572) (40 884) Taxation (9 254) (9 591) Net income after taxation (37 318) (31 293)

  39. New banking initiatives • 131000 microloans • R1 030m advances book (40% secured) • Arrears 20% • 184 Peoples Bank branches • 31000 clients • R181m advances book • Margin 5,1% • Advances up 41% to R6,4bn • Cost-to-income 34% • Present in 215 stores • 250 Go Bankers recruited • Cash back launched

  40. Old Mutual • Bancassurance • Personal financial planning • Net profit up 510% to R12,7m • OMBS regulatory approval outstanding • Group schemes • 8 500 policies sold • Gerrard Private Bank contributed R24m

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