Nedbank Retail & Business Banking

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1 Nedbank Retail & Business Banking Client centred differentiators for sustainable growth HSBC conference Topic: Game changers 4 December 2012 Ingrid Johnson Group Managing Executive: Nedbank Retail & Business Banking

2 Disclaimer Nedbank Group has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this document, including all information that may be defined as 'forward-looking statements' within the meaning of United States securities legislation. Forward-looking statements may be identified by words such as believe, 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. Forward-looking statements are not statements of fact, but statements by the management of Nedbank Group based on its current estimates, projections, expectations, beliefs and assumptions regarding the group's future performance. No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements. The risks and uncertainties inherent in the forward-looking statements contained in this document include, but are not limited to: changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; domestic and international business and market conditions such as exchange rate and interest rate movements; changes in the domestic and international regulatory and legislative environments; changes to domestic and international operational, social, economic and political risks; and the effects of both current and future litigation. Nedbank Group does not undertake to update any forward-looking statements contained in this document and does not assume responsibility for any loss or damage whatsoever and howsoever arising as a result of the reliance by any party thereon, including, but n limited to, loss of earnings, profits, or consequential loss or damage. 1

3 Nedbank is building a client centred, vision led, values driven organisation for the benefit of all stakeholders OUR VISION 2

4 Since 2004 Nedbank has sought to deliver sustainably across all parts of the group, focusing on a number of game changers Investment in product & teams for quality NIR growth Imperial Bank acquisition of remaining 49.9% Lower risk, integrated investment bank Basel II & focus on world class risk management Repositioning Nedbank Retail Re-igniting the innovation culture Business Banking as key strategic thrust Established Ecobank Nedbank Alliance Portfolio Tilt widely embedded Committed to building a visionled, values driven organisation Wealth Cluster & bought Old Mutual minority JV shareholdings 3

5 resulting in strong wholesale businesses while revealing strategic challenges in Retail as well as opportunities across Nedbank s key strategic focus areas Retail Banking 1 - headline earnings, Rm RoE % FY (156) Rest of Nedbank - headline earnings, Rm RoE % FY Emphasis for today s presentation 1. Includes Wealth businesses Prime interest rate 2008: 15.1%, 2009: 11.9% Core Tier 1 equity 2007: 7.2%, 2009: 9.9% 4

6 To deliver on Nedbank s strategic intent, Retail & BB have distinctive & differentiated positionings that leverage key trends & core strengths/competencies Trends Core differentiators Consumer preference for choice, simplicity, increased transparency and lower cost banking Rising demographics and 6% p.a. small business growth represent tomorrow s valued, aspirational clients Technological innovation (e.g. digital channels) offering opportunity for lower cost distribution and process simplicity Higher cost of capital and liquidity from Basel regulations put risk management and liabilities at a premium A choice of distinctive client centred banking experiences, delighting in moments of truth A rigorous approach to capturing virtuous circle of household & business Integrated channels strategy leveraging digital, high potential micro-markets & optimising cost Robust risk management for quality asset portfolios & liabilities innovation sustaining historical strength Collaborative cultures increasingly recognised as central to organizations effectiveness and innovation Collaborative people culture with a client-centred, relationship-oriented DNA SOURCE: Retail & BB 2012 Investor Day Presentation United Nations; IFC; Financial Inclusion Expert Group; World bank doing business; team analysis 5

7 Retail & BB are capturing the powerful virtuous circle of the individual and business through collaboration and changes to the business operating models Powerful virtuous circle of individual & business Entrepreneur / Small Bus owner 1 Business owner 1 Youth Business Seniors Retail strategic wheel (capturing elements of organisational design) Employees BB Delivery model (evolved to capture the opportunity around the business owner & employees) 1. Including their household 6

8 while also enhancing the client value proposition to unlock the virtuous circle through the business owner as a key influencer Results > 500 new business owners & key individuals banked in just ~ 8 months Positive feedback from business owners Business Banking now 50% of all new home loan registrations in Nedbank Contributing to a significant shift in Net Promoter Score, now at > 6 year high > business leads for N@W offering Source: BB ATL marketing campaign Q

9 leading to strong client reception of offering and excellent new Retail client gains of SME company employees Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun monthly account sales, # 000 Small & Med Business Corporate & Public Sector

10 Nedbank is also investing in the Youth, our future clients & entrepreneurs, for medium term benefits through compelling CVP s and links with the influencer 9

11 Integrated channels strategy is enabling a choice of distinctive client centred banking experiences My bank provides me with appropriate benefits as I do more with them I have convenient access to my preferred choice of channel(s) Voice of client in Nedbank s integrated channels vision I am guided on the use of different channels & associated benefits My bank helps me to improve my financial fitness My bank ensures simple and seamless sales & delivery of product I can move seamlessly between channels 10

12 through 6 key drivers for implementation Optimising channel footprint to capture full potential in each micro market Developing seamless sales & servicing capability within/across channels Upgrading mobile & digital to true alternatives & growing digitally enabled client base Area collaboration accelerating leads flow for greater share of wallet Aligning processes for seamless operation & fulfillment Gather Client Information Pre-population of existing client information Conclude Transaction Automated accounted opening System driven completion of payout Educating clients on most efficient & attractive choice of channels Complete Application Automatically generate application and client record where applicable Make Credit Decision Integrated credit approval Automated VAF agreement creation 1. Vehicle and Asset finance 11

13 Potential GOI (Rm) Micro-market growth / optimise strategies guiding relevant mix of integrated channels format, functionality & location High Rising Stars: Invest and develop Nedbank micro-market opportunity Grow share Movers & Shakers: Retain and grow Reviewed holistically for both wholesale & retail client needs Low Right size: Capture quick wins Cash Cows: Optimise mix & cost Low Current GOI (Rm) High 12

14 enabling a step change investment in distribution to increase accessibility for clients across South Africa as a bank for all Over R1.3bn investment in distribution since 2009; further STRATEGIC R1.3bn in INTENT the next 3 years Footprint optimised in line with micro-market opportunity STRATEGIC - ~ 50% growth INTENT in non-urban Branches & Outlets (# ) Alternate outlets Branches ATMs (# ) H1 < 5yrs old > 5yrs old H H H1 33% increase! % increase! 2015 Rural Semiurban Urban % +34% +27% H1 13

15 Developing seamless end-to-end client-centred servicing and fulfilment Consolidation of front end systems in branch From 22 disparate, product-driven frontline systems.. Easy-to-do-Business philosophy End-to-end process automation for quick decision making & fulfilment Gather Client Information Conclude Transaction Pre-population of existing client information Automated accounted opening System driven completion of payout...to an integrated client driven platform for enhanced client and staff banking experience Complete Application Make Credit Decision Automatically generate application and client record where applicable Integrated credit approval Automated VAF agreement creation 14

16 Upgrading mobile & digital for highly secure anytime, anywhere banking Enable digital channels as true alternatives Be a leader or fast global follower in commercially viable digital innovation Home Loans online application channel as true alternative to originators Market leader Cashvault with online logistics - cost effective & more seamless alternative to traditional cash handling Fast global follower Increase digitally enabled client base & revenue contribution from digital channels Nedbank App Suite TM downloads reached within 3 months Home Loan online channel contributing 10% of new intake within 2 months MyFinancialLife TM - R2.7bn of net worth aggregated across ~9 000 users Social media: ~6 800 twitter followers, ~ facebook likes and ~ Linkedin followers within a year 15

17 Integrated channels strategy translating smaller scale to a strength Nedbank Integrated Channels Strategy Implementation progress Branch o Social media listening centre launched Mobile o o o Integrated Banking System simplifying front-line fulfilment Cash recycling within areas improved by ~R1bn per month Branch redesign in pilot phase Internet Contact centre RM ATM o Capex payback time for 2011 branch investment halved o o Expansion in 30 geographic growth nodes to capture white space opportunities (50% complete) Area Collaboration unlocking lead flow within micro-markets 16

18 To deliver on Nedbank s strategic intent, Retail & BB have distinctive & differentiated positionings that leverage key trends & core strengths/competencies Trends Core differentiators Consumer preference for choice, simplicity, increased transparency and lower cost banking Rising demographics and 6% p.a. small business growth represent tomorrow s valued, aspirational clients Technological innovation (e.g. digital channels) offering opportunity for lower cost distribution and process simplicity Higher cost of capital and liquidity from Basel regulations put risk management and liabilities at a premium A choice of distinctive client centred banking experiences, delighting in moments of truth A rigorous approach to capturing virtuous circle of household & business Integrated channels strategy leveraging digital, high potential micro-markets & optimising cost Robust risk management for quality asset portfolios & liabilities innovation sustaining historical strength Collaborative cultures increasingly recognised as central to organizations effectiveness and innovation Collaborative people culture with a client-centred, relationship-oriented DNA SOURCE: 2012 Investor Day Presentation United Nations; IFC; Financial Inclusion Expert Group; World bank doing business; team analysis 17

19 Building Retail into a high performing sustainable business with increased clients and returns while sustaining wholesale strengths in a tough cycle Retail Banking 1 - headline earnings, Rm RoE % H1 Rest of Nedbank - headline earnings, Rm RoE % (69) Growth in Retail client numbers ( 000) STRATEGIC INTENT 14.2% excluding HL s back book Middle & RRB ELB Youth H H1 Total Clients Excludes Wealth businesses includes 270K clients acquired as part of MFC Source: Interim Analyst Results 1H12 Prime interest rate 2009: 11.9%, H1 2012: 9.0% 18

20 Nedbank Group is a vision led, values driven organisation delivering sustainable performance relative to peers Price : tangible book year - share price relative Oct 09 Oct 10 Oct 11 Oct 12 19