nedbank group analyst presentation · ‘2010 saw our headline earnings grow for the first time...

nedbank groupanalyst presentation 2010

‘2010 saw our headline earnings grow for the first time since 2007, ending the year marginally above our expectations as set out in the third-quarter trading update. Earnings momentum built during the year, with earnings in the second half up strongly on the first half. These results were driven by improving economic conditions and the group’s strategic focus on growing non-interest revenue (NIR). Our wholesale businesses remained resilient and the performance of Nedbank Retail improved as impairments decreased and we began to realise the benefits of the Imperial Bank acquisition. Nedbank Wealth grew strongly following the integration of the former joint ventures and pleasing growth in new business.

While the global economic recovery remains fragile, we believe the worst of the cycle is behind us and expect continued earnings growth in 2011.’

Mike brownChief Executive Officer

For more information contact:raisibe Morathi • Chief Financial officerTel: +27 11 295 9693 Mobile: +27 083 327 0290 Fax: +27 11 294 9693 E-mail: [email protected]

don bowden • Tier 1 Investor relationsTel: +27 21 702 3102 Mobile: +27 82 555 8721 Fax: +27 21 702 3107 E-mail: [email protected]

01a

net asset value per share increased 8,0% to 9 831 cents

Capital adequacy further strengthened (core Tier 1: 10,1%)

ROE (excluding goodwill) 13,4% and ROE 11,8%

Full-year dividend per share of 480 cents, up 9,1%

Directors: Dr RJ Khoza (Chairman), MWT Brown* (Chief Executive Officer), CJW Ball**, TA Boardman, TCP Chikane, GW Dempster* (Chief Operating Officer), MA Enus-Brey, Prof B de L Figaji, DI Hope (New Zealand), A de VC Knott-Craig, WE Lucas-Bull, NP Mnxasana, RK Morathi* (Chief Financial Officer), JK Netshitenzhe, JVF Roberts (British), GT Serobe, MI Wyman (British).* Executive ** Senior independent non-executive director

heaDline earnings

R4,9bn14,6%14,6%

DiluteD heaDline earnings per share

1 069cents

8,7%8,7%

strong nir growth

R13,2bn11,0%11,0%

CONTENTSCommentary 2b

Integrated sustainability 8b

Financial highlights 10b

Consolidated statement of comprehensive income 11b

Consolidated statement of financial position 12b

Condensed consolidated statement of cashflows 13b

Consolidated statement of changes in equity 14b

Return on equity drivers 16b

Operational segmental reporting 18b

Geographical segmental reporting 20b

Segmental commentary 21b

Nedbank Corporate segmental report 24b

Nedbank Wealth segmental report 25b

Nedbank Wealth – New Business premium 24b

Nedbank Retail segmental report 26b

Nedbank Business Banking segmental report 26b

Nedbank Capital segmental report 27b

Nedbank Retail – advances and impairments 28b

Operational statistics 30b

Assets under management 31b

Earnings per share and weighted average shares 32b

Consolidated statement of financial position

banking/trading categorisation 33b

Nedbank Group categories of financial instruments 34b

Restatements 38b

Notes to the consolidated statement of comprehensive income

1 Average banking balance sheet and related interest 40b

2 Impairment of loans and advances 41b

3 Non-interest revenue 42b

4 Expenses 44b

5 Taxation charge 46b

6 Non-controlling interest – ordinary shareholders 46b

7 Preference shares 47b

Notes to the consolidated statement of financial position 48b

8 Loans and advances 48b

9 Investment securities 50b

10 Investments in associate companies and joint ventures 52b

11 Intangible assets 54b

12 Ordinary share capital and premium 56b

13 Amounts owed to depositors 56b

14 Long-term debt instruments 58b

15 BEE: Estimated future dilutive shares and IFRS 2 charge 60b

AN

NU

AL FIN

AN

CIA

L RESuLTS

Nedbank Group – Share-based payments 64b

BEE deal forecasts assumptions 68b

Nedbank Group Employee Incentive Schemes 69b

Shareholders’ analysis 71b

Nedbank Limited consolidated statement of comprehensive income 72b

Nedbank Limited consolidated statement of financial position 73b

Risk and balance sheet management review 74b

Highlights 74b

Introduction 77b

Basel III 77b

Credit risk 82b

Counterparty credit risk 97b

Credit concentration risk 98b

Securitisation risk 99b

Trading market risk 100b

Equity risk (investment risk) in the banking book 103b

Operational risk 103b

Asset and liability management 103b

Liquidity risk 103b

Interest rate risk in the banking book 107b

Foreign currency translation risk in the banking book 108b

Insurance risk 109b

Capital management 110b

Cost of equity 120b

External credit ratings 120b

Summarised dti Codes scorecard 122b

Market share 123b

Definitions 128b

Share information 136b

neDBanK group analyst presentation 20102b

2010 ANNUAL RESULTS pRESENTATiONCOMMENTARyeConoMIC envIronMenT Real gross domestic product (GDP) in South Africa grew by 2,8% in 2010 compared with a decline of 1,7% in 2009. The local economy had a strong start to the year, primarily driven by improved global demand for commodities and a rebound in manufacturing production off the depressed levels of 2009. Economic activity was also boosted by strong infrastructural spending ahead of the FIFA 2010 World Cup and by the event itself, with consumer spending rising steadily for most of the year. However, fixed investment by the private sector contracted for the second year off the elevated levels seen in 2008.

Growth in both the emerging and some parts of the developed world surprised on the upside, underpinned by China’s economic strength and continued demand for commodities and capital goods. Massive liquidity injections by major central banks and historically low interest rates helped to stimulate economic growth further, particularly in emerging economies. In contrast, the underlying economic and financial environment remained fragile in the developed world, with fiscal difficulties in parts of Europe and America, continued weakness in credit markets, limited employment growth and inflationary concerns returning in emerging economies.

Household finances improved in South Africa as debt started to decrease and interest rates eased to the lowest levels in 36 years. The recovery in the credit cycle has proved to be more modest compared with previous cycles. Household demand for credit was contained by the consumer debt burden remaining relatively high, increased regulatory requirements, policy uncertainty and employment growth only resuming late in the year. Against this background the ratio of household debt to disposable income declined marginally to 78,2% from just over 80% at the end of 2009. At the same time debt service costs decreased to 7,5%, the lowest level since June 2006, and are now at a level that is more conducive to improving economic growth in the consumer sector.

In the corporate sector excess capacity and uncertainty over the sustainability of the local and global recovery limited spending. Government fixed-investment spending, although continuing to contract, emerged as the main foundation for growth.

revIew oF resulTs¹Nedbank Group showed solid earnings growth in a challenging economic environment. After a strong fourth quarter the group finished the year with earnings marginally ahead of management’s expectations set out in the third-quarter trading update. Headline earnings increased by 14,6% from R4 277 million to R4 900 million. Diluted headline earnings per share increased by 8,7% from 983 cents to 1 069 cents, slightly above the forecast range of 0% to 8% provided in the third-quarter trading update. Diluted earnings per share (DEPS) decreased by 5,3% from 1 109 cents to 1 050 cents. As previously reported, 2009 DEPS included a once-off International Financial Reporting Standards (IFRS) revaluation gain of R547 million (after taxation) from the acquisition and consolidation of the Nedbank Wealth joint ventures.

The group recorded a return on average ordinary shareholders’ equity (ROE), excluding goodwill, of 13,4% and a ROE of 11,8%.

The group maintained its well-capitalised balance sheet with core Tier 1 capital at 10,1% (2009: 9,9%), while advances grew by 5,5%, with market share gains in most lending classes aside from home loans.

The net asset value per share grew by 8,0% from 9 100 cents in December 2009 to 9 831 cents in December 2010. This is a pleasing result given the increase in the average number of shares in issue following the acquisition of the joint ventures from Old Mutual and scrip dividend distributions last year.

ClusTer perForManCeThe business clusters delivered strong NIR growth, improved impairments and contained costs below original forecasts given to the market through continued cost discipline and optimisation, while expanding the group’s footprint.

The banking clusters’ results were impacted by increased allocation of central costs and negative endowment earnings from average interest rates that were 198 basis points lower when compared with 2009. The capital optimisation exercises in Nedbank Retail and Nedbank Business Banking continued and resulted in more efficient use of capital, while the lower levels of capital used resulted in lower endowment-related interest revenue in these clusters.

Nedbank Retail reported an encouraging improvement in impairments, particularly in home loans. Impairments improved in most other businesses, with Nedbank Corporate, Nedbank Wealth and Nedbank Business Banking again recording credit loss ratios within or below through-the-cycle target ranges. Nedbank Capital incurred a higher level of impairments in shareholders’ loans in its private equity portfolio.

The businesses generated strong growth in core fee and commission income, driven primarily by volume growth, new primary clients and a number of innovative products focused on growing NIR. Nedbank Capital recorded improved trading income, particularly in the equity businesses. Nedbank Wealth’s earnings benefited from the integration of the former joint ventures and strong growth in new business, particularly in the insurance and asset management businesses.

Nedbank Retail delivered a turnaround in performance, with headline earnings increasing from a R27 million loss to a R760 million profit and ROE growing to 4,6% (2009: -0,2%). Improved earnings were achieved following the acquisition of the Motor Finance Corporation business from Imperial Bank and through outperformance in the card and personal loans businesses, good quality growth in transactional clients, improved risk-based pricing and lower impairment levels following a step change improvement in collections, asset realisations and restructured loans. This stabilisation of Retail, combined with the repositioning of the cluster to an integrated and client-centred business, should contribute to a sustainable momentum in earnings growth.

The wholesale businesses and Nedbank Wealth recorded strong ROEs and Nedbank Retail much improved earnings.

Further segmental information is available on the group’s website www.nedbankgroup.co.za.

3b

FInanCIal perForManCe neT InTeresT InCoMe (nII)NII increased by 1,9% to R16 608 million (2009: R16 306 million) and the group’s net interest margin held up well at 3,35% (2009: 3,39%), despite the impact of lower interest rates.¹ Average interest-earning banking assets increased by 3,0% (2009 growth: 9,0%).¹

Margin compression was less than expected. Margin pressure primarily resulted from a smaller endowment from lower average interest rates and the cost of lengthening the funding profile. This was partially offset by:

• the widening of margins from asset pricing and a change in asset mix, including strong growth in the group’s retail motor finance and personal loans businesses;

• a relative prime/Johannesburg Interbank Agreed Rate (JIBAR) reset benefit as a result of less aggressive interest rate cuts during 2010 compared with 2009; and

• a decline in the market cost of term liquidity during the last quarter of the year.

IMpaIrMenTs Charge on loans and advanCesThe credit loss ratio on the banking book improved to 1,36% for the period [2009: 1,52% (restated)].¹

The reduction in the impairments charge was driven mostly by Nedbank Retail, particularly in the secured portfolios that had lagged the recovery in the unsecured portfolios. Lower interest rates and the stabilising of job losses contributed to the retail credit loss ratio improving significantly from 3,17% in 2009 to 2,67%. The group further strengthened its provisioning by reducing certain security assumptions in specific impairments, increasing levels of portfolio provisioning on debt restructures of R97 million and lengthening the bad debt emergence period assumptions within Nedbank Retail home loans at an additional cost of R114 million within portfolio impairments.

The credit portfolios in Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth are of high quality and credit loss ratios remained within or below the respective clusters’ through-the-cycle levels. Nedbank Capital impairments increased in the higher-risk private equity portfolio.

Credit loss

ratio (%)

Year to

December

2010

H2

2010

H1

2010

Year to

December

2009*

Nedbank Capital 1,27 1,72 0,80 0,36Nedbank

Corporate 0,20 0,10 0,31 0,25Nedbank

Business Banking 0,40 0,48 0,32 0,52Nedbank Retail 2,67 2,42 2,93 3,17Nedbank Wealth 0,15 0,05 0,24 0,47

1,36 1,27 1,46 1,52

* Restated for average interest-earning banking advances and integration of Imperial Bank.

Defaulted advances declined by 1,04% to R26 765 million (2009: R27 045 million). Defaulted advances to total advances decreased from its peak of 6,01% in June 2010 to 5,63%. Total impairment provisions increased by 14,6% to R11 226 million (2009: R9 798 million) resulting in strengthened coverage ratios.

nIrThe group’s focus on NIR generated growth across all the clusters. NIR increased 11,0% to R13 215 million (2009: R11 906 million).¹ On a comparable basis NIR growth was 10,5% after adjusting for the acquisitions in 2009 of the Nedbank Wealth joint ventures and before fair-value adjustments. The ratio of NIR to expenses improved to 79,6% (2009: 78,8%).

Core fee and commission income grew strongly by 13,7% (like-for-like growth of 11,2%, adjusting for the Nedbank Wealth joint ventures) through volume growth, new products and new client acquisitions. The group reduced its retail transactional banking charges in 2006 and 2007. Since then price increases have been modest, with 2010 increases in line with inflation, resulting in current banking charges being similar to 2005 levels.

Insurance income grew 39,8% (18,4% on a like-for-like basis, adjusting for the Nedbank Wealth joint ventures) primarily as a result of the provision of insurance on a fast-growing personal loans book as well as the introduction of new products and improved levels of cross-selling.

Trading income increased by 13,9% to R2 096 million (2009: R1 841 million). In 2009 interest rates decreased at a rapid pace and created favourable trading conditions. Low volatility in the first half of 2010 resulted in difficult conditions for global markets and continued pressure on foreign exchange volumes and margins. This was offset by improved equity trading in the second half of the year.

Private equity markets remained constrained throughout the year. Listed-property private equity investments showed some modest gains. Overall NIR from the private equity portfolios decreased by 25,0%.

NIR from private equity (Rm)

December

2010

December

2009

Nedbank Capital 149 269Nedbank Corporate Property Finance 79 35

Total NIR from private equity 228 304

NIR was negatively impacted by R213 million (2009: R6 million profit) over the period as a result of the adverse fair-value adjustments of the group’s subordinated debt resulting from the narrowing of credit spreads. Nedbank Corporate also reflected a negative fair-value adjustment of R55 million (2009: R72 million profit) due to a downward movement in the yield curve and related convexity in the fixed-rate advances book and associated interest rate swaps.

expensesThe group has maintained a strong cost discipline over an extended period, resulting in the increase in expenses remaining below the market guidance given at the beginning of 2010.


2010 ANNUAL RESULTS pRESENTATiONCOMMENTARy continuedExpenses grew by 9,9% to R16 598 million (2009: R15 100 million)1. The increase was partly due to the acquisition of the Nedbank Wealth joint ventures and the consolidation of Merchant Bank of Central Africa. Expenses increased by 8,5% on a comparable basis.

• Staff expenses increased by 11,3% (9,8% on a comparable basis), due to annual salary increases and an increase in staff numbers of 1,8%. Staff numbers increased mostly towards the end of 2010 in line with the group’s growth strategy, with most staff placements in the frontline sales force and credit areas. All staffmembers from Imperial Bank were transferred to Nedbank without any retrenchments. Short-term incentives increased by 17,8%, slightly ahead of headline earnings growth as a result of outperformance on non-financial measures included in the calculations. Long-term incentive costs include a reversal of prior periods’ costs where performance targets were not met.

• Fees and insurance increased by 13,1% (12,3% like-for-like) as NIR grew and following an increase in card, membership association and cash fees linked to the growth in cash handling and deployment of ATMs.

• Strategic marketing and public relations costs grew by 17,2% (16,4% like-for-like) mostly from the launch of products within Nedbank Wealth and Nedbank Retail, cross-selling initiatives and the increased visibility around the FIFA 2010 World Cup. These efforts are indicative of the group’s investing for growth.

Pressure on NII from endowment-related margin compression was again, as in 2009, the main contributor that led to the efficiency ratio deteriorating from 53,5% to 55,7%.

TaxaTIon¹The taxation charge (excluding taxation on non-trading and capital items) increased by 10,9% to R1 366 million (2009: R1 232 million) arising from profit growth adjusted for:

• dividend income as a proportion of total income being lower than in 2009;

• the lower provision for secondary tax on companies, owing to an increase of shareholders (81,5%) who elected to take scrip for the 2009 final dividend distribution (2008 final dividend distribution: 32,0%); and

• the reduced accounting effect from structured finance transactions that continued to unwind.

The effective tax rate increased marginally from 20,2% to 20,7%.

non-TradIng and CapITal ITeMs¹Income after taxation from non-trading and capital items decreased to a R89 million loss from a R549 million profit in 2009. The main component of this was an anticipated R34 million writedown on Imperial Bank computer software following the acquisition. The 2009 profit arose from the accounting-related revaluation of BoE (Pty) Limited and Nedgroup Life Assurance Company Limited on the acquisition of the remaining shares in the joint ventures.

sTaTeMenT oF FInanCIal posITIonCapITal The group’s capital adequacy ratios remain well above the group’s internal targets and marginally ahead of December 2009. This resulted from ongoing capital and risk-weighted asset optimisation,

a strategic focus on ‘managing for value’ and a 0,6% increase in capital from higher levels of scrip takeup and other share issues for staff incentives and black economic empowerment (BEE) structures. This growth was offset by the approximately 1,3% negative impact on the group’s capital adequacy ratios from the cash acquisition of 49,9% of Imperial Bank and the treatment of capitalised software as an intangible asset rather than as a fixed asset for capital adequacy purposes.

2010 2009

Internal

target

range

Regulatory

minimum

Core Tier 1 ratio 10,1% 9,9% 7,5% to 9,0% 5,25%Tier 1 ratio 11,7% 11,5% 8,5% to 10,0% 7,00%

Total capital

ratio 15,0% 14,9%

11,5% to

13,0% 9,75%

Ratios calculated including unappropriated profits.

Further detail will be available in the group’s Pillar 3 Report to be published in April 2011 on the group’s website www.nedbankgroup.co.za.

rIsk MeThodologIes and CapITal alloCaTIonNedbank Limited received approval from the South African Reserve Bank (SARB) to use, for regulatory capital purposes, the Advanced Measurement Approach for operational risk, effective from 2010, and to use the Internal Model Approach for market trading risk, effective from 2011. Nedbank Limited now has approval for all three of the major Pillar 1 risk approaches under Basel II, having received approval for using the Advanced Internal Ratings-based Approach for credit risk from the implementation date of Basel II in January 2008.

Enhancements relating to the internal capital allocation to business clusters were implemented in 2010. A major effect of these enhancements has been the allocation of most of the surplus capital held at a group level to the clusters, and the comparative results for the operational clusters have been restated accordingly. These enhancements have had no impact on the group’s overall capital levels and ROE, but have impacted the ROEs recorded by the clusters on a restated basis.

FundIng and lIquIdITy Nedbank Group’s liquidity position remains sound. The group continues to focus on diversifying its funding base, lengthening its funding profile and maintaining appropriate liquidity buffers.

Nedbank Group increased its long-term funding ratio from increased capital market issuances under the domestic medium-term note programme (R6,23 billion) and also increased the duration in the money market book.

The group’s liquidity position is further supported by a strong loan-to-deposit ratio of 97% and a low reliance on interbank and foreign currency funding. Nedbank Group is able to leverage off its favourable retail, commercial and wholesale deposit mix, which compares well with domestic industry averages.

5b

basel III developMenTs The majority of the Basel III proposals have recently been finalised, although some significant aspects remain to be completed in 2011. In South Africa the details of exactly how Basel III will be adopted will be determined by the SARB.

For Nedbank Group the impact of the new capital requirements is expected to be manageable. On a Basel III pro forma basis for 2010 the group is in a position to absorb the Basel III capital implications with all capital ratios still remaining above the top end of current internal target ranges. These should improve further by the end of 2013 from projected earnings, continuing capital and risk-weighted asset optimisation, and the impact of the group’s active portfolio management strategy.

Once Basel III has been finalised, Nedbank Group will review its target capital ratios.

In respect of the two proposed liquidity ratios, the liquidity coverage ratio for implementation in 2015 and the ‘net stable funding ratio’ (NSFR) for implementation in 2018, the impact of compliance by the SA banking industry would be punitive if implemented as they currently stand, particularly the NSFR in the light of structural constraints within the SA financial market. This is the case for many emerging-market jurisdictions around the world, and the negative effect on economic growth and employment would be significant. The group anticipates that a pragmatic approach on this issue will be applied prior to the finalisation in 2018.

loans and advanCesNedbank Group continued to make good progress in improving asset quality, and active management of the bank’s portfolios towards higher-economic-profit businesses resulted in slower asset growth in selected areas.

The group grew advances ahead of the industry at 5,5% to R475 billion (2009: R450 billion).¹ The advances by cluster are as follows:

Loans and advances (Rm)¹

December

2010

December

2009 % change

Nedbank Capital 62 328 55 315 12,7

− Banking activity 42 650 41 550 2,6− Trading activity 19 678 13 765 43,0

Nedbank Corporate 157 703 146 035 8,0Nedbank Business Banking 50 765 50 115 1,3Nedbank Retail 187 334 17 9 885 4,1Nedbank Wealth 16 869 19 089 (11,6)Other 274 (138) >100

475 273 450 301 5,5

Core banking advances in Nedbank Capital grew by 2,6% from December 2009, with R10,8 billion of new advances largely offset by repayments. Nedbank Corporate advances grew by 8,0%. Nedbank Business Banking advances ended marginally up, with R12 billion of new advances being offset to a large extent by repayments of other loans. The repositioning of Nedbank Retail and the focus on growing advances that potentially generate

higher economic profits resulted in home loans decreasing, as planned, by 0,3%, with stronger growth in personal loans, cards and motor finance of 39,1%, 7,9% and 9,8% respectively. Properties in possession decreased by 25,4%. The strength of the rand and the investment in uK Treasury bills, compared with previous placements with other banks, led to a decrease in advances in Nedbank Wealth.

deposITsDeposits increased by 4,5% to R490 billion (2009: R469 billion).¹

Optimising the mix of the deposit book remains a key focus in reducing the high cost of longer-term and professional funding. This is critical as banks compete more aggressively for lower-cost deposit pools with longer behavioural duration and as they start to take cognisance of the possible Basel III liquidity ratios. Low interest rates, coupled with low domestic savings levels and the deleveraging of consumers, led to modest growth in retail deposits during 2010. Relatively higher deposit growth in the wholesale sector indicated increasing working capital and available capacity among corporates. Throughout the year demand for higher-yielding negotiable certificates of deposit remained strong within the professional funds and corporate markets.

ouTlook Lower domestic interest rates and rising levels of income should boost consumer spending. Together with improving global demand, this is expected to increase confidence levels and lead to better consumer demand and capital formation in 2011 and further momentum in 2012.

Retail banking credit growth should fare better as household credit demand improves, house prices edge higher and impairments moderate. Corporate markets are expected to show modest improvement, while the small and medium enterprise (SME) market is likely to remain under pressure until fixed-investment activity improves.

Government spending should continue to underpin growth, although this is expected to be limited by the reduction in fiscal deficits over the medium term. Government’s stronger focus on job creation is also positive and much will depend on the ability to create a more enabling environment for business growth. Key to this will be improvements in the building of infrastructure and a more conducive and certain regulatory and policy environment to reduce the medium-term constraints on economic growth.

prospeCTsNedbank is well placed for earnings growth in 2011 and remains on track to meet its medium- to long-term financial targets in 2013. The group will continue to invest to generate sustainable revenue growth, underpinned by ongoing cost optimisation and efficiency improvements. Growing the bank’s overall franchise and maintaining momentum on the turnaround in the Retail Cluster, supported by a liquid and well-capitalised balance sheet, are key to delivering sustainable growth.

Margins should widen slightly, given that interest rates are expected to remain unchanged, and hence the negative effect of assets repricing quicker than liabilities out to three months will decrease. In addition, the cost of term liquidity is expected to decline as more expensive deposits mature and as below-trend


2010 ANNUAL RESULTS pRESENTATiONCOMMENTARy continuedeconomic growth continues, albeit at higher levels than last year. Overall advances growth is expected to be in the mid to upper single digits.

Impairments are expected to continue reducing in line with the improved quality of assets supported by asset pricing on new advances that appropriately reflects risk and the related cost of funds. The credit loss ratio is currently expected to decrease but to remain above the group’s target range in 2011.

Transactional volumes are expected to increase as the economy improves and the group’s focus on growing primary clients is maintained.

The group’s medium-term targets remain unchanged and are included, with an outlook for performance against these targets for 2011, in the table below:

Metric2010

performance Medium-to-long-term targets 2011 outlook

ROE (excl goodwill) 13,4% 5% above monthly weighted average cost of ordinary shareholders' equity

Improving, remaining below target.

Growth in diluted headline earnings per share (EPS)

8,7% At least consumer price index + GDP growth + 5%

Improving, forecast to exceed target.

Impairments charge

(credit loss ratio)

1,36% Between 0,6% and 1,0% of average banking advances

Improving, remaining above target.

NIR:expenses ratio 79,6% > 85% Improving, remaining below target.

Efficiency ratio 55,2% < 50,0% Improving, remaining above target.

Basel II core Tier 1 capital adequacy ratio

10,1% 7,5% to 9,0% Improving, remaining above top end of target range.

Basel II Tier 1 capital adequacy ratio 11,7% 8,5% to 10,0% Improving, remaining above top end of target range.

Basel II total capital adequacy ratio 15,0% 11,5% to 13,0% Improving, remaining above top end of target range.

Economic capital Capitalised to 99,93% confidence interval on economic capital basis (target debt rating A including 10% buffer)

Dividend cover policy 2,30% 2,25 to 2,75 times 2,25 to 2,75 times.

Shareholders are advised that these forecasts have not been reviewed or reported on by the group’s auditors.

subsequenT evenTs – bee sCheMe share repurChase¹The lock-in period for participants in certain of Nedbank’s BEE schemes ended on 1 January 2011. In terms of these schemes Nedbank Group was entitled to repurchase 9,9 million Nedbank Group ordinary shares at a nominal value and on 6 January 2011 exercised such entitlement. The financial effects of this transaction are immaterial.

board Changes durIng The yearBob Head and Jabu Moleketi resigned from the board with effect from 19 February 2010 and 1 March 2010 respectively. Tom Boardman was appointed a non-executive director with effect from 1 March 2010. Joel Netshitenzhe was appointed an independent non-executive director with effect from 5 August 2010.

aCCounTIng polICIes¹ Nedbank Group Limited is a company domiciled in South Africa. The summarised consolidated financial results of the group at and

for the year ended 31 December 2010 comprise the company and its subsidiaries (the ‘group’) and the group’s interests in associates and jointly controlled entities.

Nedbank Group’s principal accounting policies have been prepared in terms of IFRS and have been applied consistently over the current and prior financial years.

Nedbank Group’s summarised consolidated financial results have been prepared in accordance with the recognition and measurement criteria of IFRS, interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and the presentation and disclosure requirements of International Accounting Standard (IAS) 34: Interim Financial Reporting, as well as the AC 500 standards as issued by the Accounting Practices Board.

In the preparation of these summarised consolidated financial results the group has applied key assumptions concerning the future and other inherent uncertainties in recording various

7b

assets and liabilities. These assumptions were applied consistently to the financial results for the year ended 31 December 2010. These assumptions are subject to ongoing review and possible amendments.

resTaTeMenTs¹The ratios for ROE and return on assets (ROA) have been restated with the denominator changing from simple average to daily average for equity and total asset values respectively. The calculation of the credit loss ratio has been changed from simple-average advances to daily-average banking advances (thereby excluding trading advances from the calculation). Comparatives for ROE and ROA changes do not affect the segmental ratios, but do affect the group ratios, while credit loss ratio changes affect both.

The comparative results for the operations segment reporting at 31 December 2009 have been restated in line with the group’s implementation of a revised economic capital allocation methodology as well as the integration of Imperial Bank Limited within various operating segments. These restatements have no effect on the group results and ratios, and only changes segment cluster results and ratios.

audITed resulTs – audITors’ reporT KPMG Inc and Deloitte & Touche, Nedbank Group’s independent auditors, have audited the consolidated annual financial results of Nedbank Group Limited from which the summarised consolidated financial results have been derived, and have expressed an unmodified audit opinion on the consolidated annual financial statements. The summarised consolidated financial results comprise the consolidated statement of financial position at 31 December 2010, consolidated statement of comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cashflow for the 12 months then ended, and selected explanatory notes. The selected explanatory notes are marked with¹. The audit report is available for inspection at Nedbank Group’s registered office.

Forward-lookIng sTaTeMenTsThis announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Nedbank Group and its group companies that, by their nature, involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, global, national and regional economic conditions; levels of securities markets; interest rates; credit or other risks of lending and investment activities; as well as competitive and regulatory factors. By consequence, all forward-looking statements have not been reviewed or reported on by the group’s auditors.

FInal dIvIdend deClaraTIonNotice is hereby given that a final dividend of 268 cents per ordinary share has been declared, payable to shareholders for the year ended 31 December 2010. In accordance with the provisions of STRATE, the electronic settlement and custody system used by JSE Limited, the relevant dates for the dividend are as follows:

Event DateLast day to trade (cum dividend) Friday, 1 April 2011Shares commence trading (ex dividend) Monday, 4 April 2011Record date (date shareholders

recorded in books) Friday, 8 April 2011Payment date Monday, 11 April 2011

Share certificates may not be dematerialised or rematerialised between Monday, 4 April 2011, and Friday, 8 April 2011, both days inclusive.

On Monday, 11 April 2011, the dividend will be electronically transferred to the bank accounts of all certificated shareholders where this facility is available. Where electronic funds transfer is either not available or not elected by the shareholder, cheques dated Monday, 11 April 2011, will be posted on that date.

Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 11 April 2011.

The above dates and times are subject to change. Any changes will be published on the Securities Exchange News Service (SENS) and in the press.

For and on behalf of the board

Dr Reuel J Khoza Michael WT BrownChairman Chief Executive Officer

28 February 2011

8b neDBanK group analyst presentation 2010

INTEGRATED SuSTAINABILITyAS A STRATEgiC SUCCESS DRivERRather than managing sustainability as a separate business

requirement, Nedbank Group integrates sustainability matters

into strategic decision making and daily operations.

By integrating the four pillars of economic, social, cultural and

environmental sustainability, Nedbank Group is able to ensure

the continued growth and success of its business, optimise

returns for its shareholders over the long term, and remain

a relevant business for its staff, clients, suppliers and the

communities in which it operates.

In line with King III reporting guidelines the group's reporting

is also aligned with this integrated sustainability philosophy,

with all stakeholder communication structured to incorporate

the sustainability cornerstones of the organisation. This is a

significant departure from traditional financial reporting, which

focused exclusively on economic matters, and reflects the

group's commitment to embracing its role as a leading large

corporate in the private sector – to help create a sustainable

environment and future for all South Africans.

susTaInabIlITy hIghlIghTs For 2010As most of the information contained in this booklet deals with

the economic sustainability matters of Nedbank Group during

the 2010 reporting period, the highlights below relate to the

remaining three pillars of cultural, social and environmental

sustainability.

CulTural susTaInabIlITyNedbank Group continues to enjoy positive shifts in its corporate

culture and climate thanks to its ongoing focus on developing

its people, with a particular emphasis on the retention and

attraction of talented employees who support the organisation’s

goals and objectives.

In 2010 the group maintained its level 2 rating in respect of the

broad-based black economic empowerment (BBBEE) Codes of

the Department of Trade and Industry (dti) and ranked as South

Africa’s third most empowered corporate and number one bank

and financial services group by the Financial Mail Empowerdex

survey for the past two years.

Nedbank Group achieved its skills development target for the

period under review, with 71% of spend allocated to previously

disadvantaged groups.

In July 2010 the Nedbank Group Eyethu Broad-based Employee

Scheme vested, benefiting the 14 699 employees (including past

employees) who had received shares in 2005. These shares have

appreciated in value by approximately 65% since they were first

issued to qualifying employees at the inception of the scheme.

soCIal susTaInabIlITyAligned with the group’s key material objective to build societal

capital in South Africa, Nedbank Group’s social sustainability

efforts involve more than mere monetary support and see

the group actively seeking out opportunities to develop and

grow small businesses, foster job creation opportunities and

contribute to local communities in a sustainable manner.

The dti Codes stipulate that 1% of SA net profit after tax (based

on the 2009 financial year) should be allocated to socioeconomic

development. For Nedbank Group this equated to R54 million in

2010.

As the primary corporate social investment arm of Nedbank

Group, the Nedbank Foundation’s work is key to the group’s social

sustainability efforts. During 2010 the Nedbank Foundation provided

R35,08 million (2009: R30,5 million) in funding to 283 projects

and causes (2009: 291) in all nine provinces of South Africa. Over

the past five years the Nedbank Foundation has provided over

R132 million in funding to projects across South Africa.

envIronMenTal susTaInabIlITyAs the first financial services company in Africa to achieve

carbon neutrality, Nedbank Group remains committed to

reducing its carbon footprint, and that of its suppliers, clients

and staff proactively.

During 2010 the cost of maintaining the group's carbon-neutral

status comprised two elements:

• Direct costs related to the purchase of the carbon emission

reduction certificates required to offset those emissions that

could not be removed through carbon reduction activities.

These amounted to approximately R16 million.

• Indirect costs related to investments made to achieve

groupwide intensity reduction targets. These amounted to

approximately R7 million.

In addition to the environmental benefits of ongoing carbon

reduction by the group, the cost savings achieved for the period

2008 to 2010 as a result of reduction initiatives amounted to

more than R36 million. This figure does not factor in related

product and services revenue or reputational benefits.

envIronMenTal susTaInabIlITy IndICaTors – 2010Nedbank Group's delivery against key environmental

sustainability indicators for 2010 (compared with the previous

two years) is outlined below:

9b

indicator 2010 2009 2008 Comments

Total carbon emissions

(tonnes)*

213 428,09 213 081,32 135 468,69 The total reported greenhouse gas (GHG) emissions

in absolute terms increased by 0,16% year-on-year

from 2009 to 2010. However, this increase is as

a consequence of efforts to continue to expand

Nedbank Group's GHG report boundary and scope,

while simultaneously focusing efforts on reducing

its environmental impact.

Nedbank Group’s emissions per fulltime employee

(FTE) were reduced year-on-year by 6% to

8,25 tonnes per annum (tpa) and emissions per m2

of office space were also reduced by almost 4% to

0,39 tpa.

Electricity consumption

(kWh)#

83 341 027 95 546 670 98 710 927 Altogether 77% of the group's carbon footprint is

from electricity usage. The year 2010 saw intense

efforts and extensive investment aimed at reducing

this – resulting in an additional intensity reduction

of 13% per FTE.

Water consumption

(kilolitres)#

263 876 276 481 373 935 The group's initial water intensity reduction target

of 5% by 2010 (from 2005 levels) was met by the

end of 2009. A new target was set and a number

of initiatives are already resulting in a significant

reduction in water consumption.

Waste reduction: landfill

(tonnes)#

497 552 674 A 10% intensity reduction in waste generation

has been set for 2010 and 2011, based on 2009

figures. This translates into a 34,12 kg reduction per

employee by the end of 2011. Good progress has

been made against these targets.

Total recycled materials –

glass, plastic, tin, cardboard

and paper (tonnes)#

500 454,91 419,20

Paper consumption (tonnes) 1 917,29 1 932,22* 1 928,26 Paper constitutes about 2% of Nedbank's total

carbon footprint.

* 2009 restatement due to legacy system issues and overstated emission factors utilised

# Campus sites only

For more information refer to the 2010 Nedbank group

integrated Annual Report

The information provided on these pages represents a small

sample of the sustainability efforts and achievements of

Nedbank Group in 2010. For more detail, as well as insights

into the combined sustainability benefits delivered through the

group's initiatives during the past year, please refer to the 2010

Nedbank Group Integrated Annual Report, which can be accessed

at www.nedbankgroup.co.za from the end of March 2011.OTHER

OFFICE PAPER

PRODuCT DISTRIBuTION

COMMuTING

BuSINESS TRAVEL

ELECTRICITy

NEDBANKS 2010 CARBON FOOTpRiNT

77,46%

1,95%

3%

3,23%

16,46%


FiNANCiAL HigHLigHTSFOR THE yEAR ENDED 31 DECEMBER

% Change 2010 2009

sTaTIsTICsNumber of shares listed m 514,9 498,7 Number of shares in issue excluding shares held by group entities m 448,6 435,7 Weighted average number of shares m 443,9 423,4 Diluted weighted average number of shares m 458,2 435,1 Headline earnings Rm 14,6 4 900 4 277Profit attributable to equity holders of the parents Rm (0,3) 4 811 4 826Economic (loss)/profit* Rm (289) 57Headline earnings per share cents 9,3 1 104 1 010 Diluted headline earnings per share cents 8,7 1 069 983 Basic earnings per share cents (4,9) 1 084 1 140 Diluted basic earnings per share cents (5,3) 1 050 1 109 Ordinary dividends declared per share cents 9,1 480 440

– Interim 212 210 – Final 268 230

Dividend paid per share cents 442 520 Dividend cover times 2,30 2,30 Total assets administered by the group Rm 8,1 711 288 657 907

– Total assets Rm 6,7 608 718 570 703 – Assets under management** Rm 17,6 102 570 87 204

Life assurance embedded value Rm 29,7 1 031 795Life assurance value of new business Rm 57,8 295 187Net asset value per share cents 8,0 9 831 9 100 Tangible net asset value per share cents 10,3 8 160 7 398 Closing share price cents 5,1 13 035 12 405 Price/earnings ratio historical 11,8 12,3 Market capitalisation Rbn 8,4 67,1 61,9 Number of permanent employees 1,8 27 525 27 037

key raTIos (%)Return on ordinary shareholders’ equity (ROE) * 11,8 11,8 ROE excluding goodwill * 13,4 13,4 Return on total assets (ROA) * 0,82 0,76 Net interest income to average interest-earning banking assets 3,35 3,39 Non-interest revenue to total income 44,3 42,2 Non-interest revenue to total expenses 79,6 78,8 Credit loss ratio banking advances * 1,36 1,52 Efficiency ratio 55,7 53,5 Efficiency ratio (excluding BEE transaction expenses) 55,2 53,1 Effective taxation rate 20,7 20,2 Group capital adequacy ratios: Basel II (including unappropriated profits)

– Core Tier I 10,1 9,9 – Tier 1 11,7 11,5 – Total 15,0 14,9

* Certain of the group’s reporting ratio calculations have been adjusted. The 2009 ratios for return on equity (ROE), and return on assets (ROA) have been

restated with the denominator changing from simple average to daily average for equity and total assets values, respectively. The calculation of the

credit loss ratio has been changed from simple average advances to daily banking advances (thereby excluding trading advances from the calculation).

Comparatives have been restated accordingly.

** Restated (refer page 31b)

11b

Rm Note % Change 2010 2009

Interest and similar income (12,2) 44 377 50 537 Interest expense and similar charges (18,9) 27 769 34 231

Net interest income 1 1,9 16 608 16 306 Impairment charge on loans and advances 2 (6,7) 6 188 6 634

Income from lending activities 7,7 10 420 9 672 Non-interest revenue 3 11,0 13 215 11 906

Operating income 9,5 23 635 21 578 Total expenses 4 9,9 16 598 15 100

Operating expenses 9,9 16 450 14 974 BEE transaction expenses 17,5 148 126

Indirect taxation 2,1 447 438

Profit from operations before non-trading and capital items 9,1 6 590 6 040 Non-trading and capital items (91) 624

Profit on sale of subsidiaries, investments and property and

equipment (4) 635 Net impairment of investments, property and equipment

and capitalised development costs (87) (11)

Profit from operations (2,5) 6 499 6 664 Share of profits of associates and joint ventures 10 (98,2) 1 55

Profit before direct taxation (3,3) 6 500 6 719 Total direct taxation 5 4,4 1 364 1 307

Direct taxation 10,9 1 366 1 232 Taxation on non-trading and capital items (2) 75

profit for the year (5,1) 5 136 5 412

Other comprehensive income net of taxation (77) (228)

Exchange differences on translating foreign operations (246) (335)Fair value adjustments on available-for-sale assets (3) 21 Gains on property revaluations 172 86

Total comprehensive income for the year (2,4) 5 059 5 184

profit attributable to:Equity holders of the parent 4 811 4 826 Non-controlling interest – ordinary shareholders 6 59 242 Non-controlling interest – preference shareholders 7 266 344

profit for the year (5,1) 5 136 5 412

Total comprehensive income attributable to:Equity holders of the parent 4 734 4 603 Non-controlling interest – ordinary shareholders 59 237 Non-controlling interest – preference shareholders 266 344

Total comprehensive income for the year (2,4) 5 059 5 184

earnIngs reConCIlIaTIonProfit attributable to equity holders of the parent (0,3) 4 811 4 826 Less: Non-headline earnings items (89) 549

Non-trading and capital items (91) 624 Taxation on non-trading and capital items 2 (75)

Headline earnings 14,6 4 900 4 277

CONSOLIDATED STATEMENT OF COMpREHENSivE iNCOME

FOR THE yEAR ENDED 31 DECEMBER


CONSOLIDATED STATEMENT OF FiNANCiAL pOSiTiON AT 31 DECEMBER

Rm Note 2010 2009

asseTsCash and cash equivalents 8 650 7 867 Other short-term securities 27 044 18 550 Derivative financial instruments 13 882 12 710 Government and other securities 31 824 35 983 Loans and advances 8 475 273 450 301 Other assets 10 014 5 455 Clients’ indebtedness for acceptances 1 953 2 031 Current taxation receivable 483 602 Investment securities 9 11 918 11 025 Non-current assets held for sale 5 12 Investments in associate companies and joint ventures 10 936 924 Deferred taxation asset 284 282 Investment property 199 211 Property and equipment 5 612 4 967 Long-term employee benefit assets 2 052 1 860 Intangible assets 11 7 494 7 415 Mandatory reserve deposits with central banks 11 095 10 508

total assets 608 718 570 703

equITy and lIabIlITIesOrdinary share capital 12 449 436 Ordinary share premium 15 522 13 728 Reserves 28 130 25 485

total equity attributable to equity holders of the parent 44 101 39 649 Non-controlling interest attributable to

– ordinary shareholders 6 153 1 849 – preference shareholders 3 560 3 486

total equity 47 814 44 984 Derivative financial instruments 12 052 11 551 Amounts owed to depositors 13 490 440 469 355 Other liabilities 18 245 11 252 Liabilities under acceptances 1 953 2 031 Current taxation liabilities 191 315 Deferred taxation liabilities 1 804 1 945 Long-term employee benefit liabilities 1 414 1 304 Investment contract liabilities 7 309 6 749 Insurance contract liabilities 1 392 1 133 Long-term debt instruments 14 26 104 20 084

total liabilities 560 904 525 719

total equity and liabilities 608 718 570 703

Guarantees on behalf of clients 29 614 28 161

13b

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


Rm 2010 2009

Cash generated by operations 15 288 14 915 Change in funds for operating activities (12 891) (14 603)

Net cash from operating activities before taxation 2 397 312 Taxation paid (2 093) (2 318)

Cash flows from/(utilised by) operating activities 304 (2 006)Cash flows utilised by investing activities (4 438) (3 171)Cash flows from financing activities 5 504 4 878

Net increase/(decrease) in cash and cash equivalents 1 370 (299)Cash and cash equivalents at the beginning of the year 18 375 18 674

Cash and cash equivalents at the end of the year 19 745 18 375

Cash and cash equivalents 8 650 7 867Mandatory reserve deposits with central banks 11 095 10 508


CONSOLIDATED STATEMENT OF CHANgES iN EqUiTY FOR THE yEAR ENDED 31 DECEMBER

Rm

Number ofordinary

shares

Ordinaryshare

capital

Ordinaryshare

premium

Foreign currency

translationreserve

Propertyrevaluation

reserve

Share-basedpayment

reserve

Other non-distributable

reserves *

Available-for-

sale reserve

Otherdistributable

reserves **

Total equityattributable

to equityholders of

the parent

Non-controlling

interestattributableto ordinary

shareholders

Non-controlling

interestattributable

to preferenceshareholders

Total equity

Balance at 31 December 2008 409 707 740 410 11 370 545 951 949 175 64 20 449 34 913 1 881 3 279 40 073 Shares issued in terms of Employee Incentive Schemes 8 848 120 9 825 834 834 Shares issued in terms of capitalisation award 7 928 235 8 649 657 657 Shares issued in terms of BEE transaction 2 488 048 2 294 296 296 Shares issued 12 855 359 13 1 160 1 173 361 1 534 Share delisted in terms of BEE transaction (2 388 143) (2) (2) (2)Shares acquired/cancelled by group entities and BEE Trusts (3 706 182) (4) (570) (574) (574)Preference share dividend paid – (353) (353)Ordinary minority shareholders’ share of preference dividend paid – (9) 9 –Dividends paid to ordinary shareholders (2 253) (2 253) (5) (2 258)Total income and expenses for the year (321) 51 (74) (2) 12 4 939 4 605 (18) 190 4 777

Total comprehensive income for the year (321) 86 12 4 826 4 603 237 344 5 184 Net (expenses)/income recognised directly in equity (35) (74) (2) 113 2 (255) (154) (407)Transfer (to)/from reserves (35) (102) 2 135 – –Preference shares acquired by group entities – (154) (154)Share-based payments reserve movements 28 28 28 Acquisition of subsidiary – 26 26 Buy out of outside shareholders’ interests (17) (17) (281) (298)Regulatory risk reserve provision (4) (4) (4)Other movements (5) (5) (5)

balance at 31 december 2009 435 733 177 436 13 728 224 1 002 875 173 76 23 135 39 649 1 849 3 486 44 984 shares issued in terms of employee Incentive schemes 8 823 158 9 1 111 1 120 1 120 shares issued in terms of capitalisation award 7 397 653 7 937 944 944 shares issued in terms of bee transaction 1 225 560 2 217 219 219 share delisted in terms of bee transaction (1 225 560) (2) (2) (2)shares acquired/cancelled by group entities and bee Trusts (3 389 877) (3) (471) (474) (474)preference shares issued – 92 92 preference share dividend paid (5) (5) (281) (286)dilution of shareholding in subsidiary (13) (13) 13 –dividends paid to ordinary shareholders (2 042) (2 042) (8) (2 050)Total income and expenses for the year (244) 144 74 (49) 22 4 758 4 705 (1 701) 263 3 267

Total comprehensive income for the year (246) 172 (3) 4 811 4 734 59 266 5 059 net (expenses)/income recognised directly in equity 2 (28) 74 (49) 25 (53) (29) (1 760) (3) (1 792)

Transfer (to)/from reserves 2 (28) 4 (46) 25 43 – –liquidation of subsidiaries (4) (4) (4)share-based payments reserve movements 70 70 70 additional capitalisation of subsidiaries – 2 2 buy out of outside shareholders’ interests (91) (91) (1 762) (3) (1 856)regulatory risk reserve provision (3) (3) (3)other movements (1) (1) (1)

balance at 31 december 2010 448 564 111 449 15 522 (20) 1 146 949 124 98 25 833 44 101 153 3 560 47 814

* Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in

order to comply with the Bank’s Act, 1990.

** Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves.

RESERVES

15b

Rm

Number ofordinary

shares

Ordinaryshare

capital

Ordinaryshare

premium

Foreign currency

translationreserve

Propertyrevaluation

reserve

Share-basedpayment

reserve

Other non-distributable

reserves *

Available-for-

sale reserve

Otherdistributable

reserves **

Total equityattributable

to equityholders of

the parent

Non-controlling

interestattributableto ordinary

shareholders

Non-controlling

interestattributable

to preferenceshareholders

Total equity

Balance at 31 December 2008 409 707 740 410 11 370 545 951 949 175 64 20 449 34 913 1 881 3 279 40 073 Shares issued in terms of Employee Incentive Schemes 8 848 120 9 825 834 834 Shares issued in terms of capitalisation award 7 928 235 8 649 657 657 Shares issued in terms of BEE transaction 2 488 048 2 294 296 296 Shares issued 12 855 359 13 1 160 1 173 361 1 534 Share delisted in terms of BEE transaction (2 388 143) (2) (2) (2)Shares acquired/cancelled by group entities and BEE Trusts (3 706 182) (4) (570) (574) (574)Preference share dividend paid – (353) (353)Ordinary minority shareholders’ share of preference dividend paid – (9) 9 –Dividends paid to ordinary shareholders (2 253) (2 253) (5) (2 258)Total income and expenses for the year (321) 51 (74) (2) 12 4 939 4 605 (18) 190 4 777

Total comprehensive income for the year (321) 86 12 4 826 4 603 237 344 5 184 Net (expenses)/income recognised directly in equity (35) (74) (2) 113 2 (255) (154) (407)Transfer (to)/from reserves (35) (102) 2 135 – –Preference shares acquired by group entities – (154) (154)Share-based payments reserve movements 28 28 28 Acquisition of subsidiary – 26 26 Buy out of outside shareholders’ interests (17) (17) (281) (298)Regulatory risk reserve provision (4) (4) (4)Other movements (5) (5) (5)

balance at 31 december 2009 435 733 177 436 13 728 224 1 002 875 173 76 23 135 39 649 1 849 3 486 44 984 shares issued in terms of employee Incentive schemes 8 823 158 9 1 111 1 120 1 120 shares issued in terms of capitalisation award 7 397 653 7 937 944 944 shares issued in terms of bee transaction 1 225 560 2 217 219 219 share delisted in terms of bee transaction (1 225 560) (2) (2) (2)shares acquired/cancelled by group entities and bee Trusts (3 389 877) (3) (471) (474) (474)preference shares issued – 92 92 preference share dividend paid (5) (5) (281) (286)dilution of shareholding in subsidiary (13) (13) 13 –dividends paid to ordinary shareholders (2 042) (2 042) (8) (2 050)Total income and expenses for the year (244) 144 74 (49) 22 4 758 4 705 (1 701) 263 3 267

Total comprehensive income for the year (246) 172 (3) 4 811 4 734 59 266 5 059 net (expenses)/income recognised directly in equity 2 (28) 74 (49) 25 (53) (29) (1 760) (3) (1 792)

Transfer (to)/from reserves 2 (28) 4 (46) 25 43 – –liquidation of subsidiaries (4) (4) (4)share-based payments reserve movements 70 70 70 additional capitalisation of subsidiaries – 2 2 buy out of outside shareholders’ interests (91) (91) (1 762) (3) (1 856)regulatory risk reserve provision (3) (3) (3)other movements (1) (1) (1)

balance at 31 december 2010 448 564 111 449 15 522 (20) 1 146 949 124 98 25 833 44 101 153 3 560 47 814

* Represents other non-distributable revaluation surplus on capital items and non-distributable reserves transferred from other distributable reserves in

order to comply with the Bank’s Act, 1990.

** Represents the accumulated profits after distributions to shareholders and appropriations of retained earnings to other non-distributable reserves.

RESERVES


RETURN ON EqUiTY DRivERS FOR THE yEAR ENDED 31 DECEMBER

2010 2009 2010 2009

Net interest income 16 608 16 306

Net interest income/average interest-earning banking

assets 3,35% 3,39%

less

impairments/

Nii less

Impairments/

NII

Impairment of loans and advances (6 188) (6 634) Impairments/average interest-earning banking assets 1,25% 4,76% 37,3% 1,38% 4,48% 40,7%

add add

Non-interest revenue 13 215 11 906

Non-interest revenue/average interest-earning banking

assets 2,66%

NiR/Expenses

79,6% 2,47%

NIR/Expenses

78,8%

income from normal operations 23 635 21 578

less

Efficiency

ratio less Efficiency ratio

Total operating expenses (16 598) (15 100) Total expenses/average interest-earning banking assets 3,35% 55,7% 3,14% 53,5%

add addShare of profits of associates and joint

ventures 1 55 Associate income/average interest-earning banking assets 0,00% 0,01%

net profit before taxation 7 038 6 533 1,41% 1,35%

Indirect taxation (447) (438) mu ltiply multiply

Direct taxation (1 366) (1 232) 1 - effective taxation rate 0,74 0,74

net profit after taxation 5 225 4 863 multiply multiply

Non-controlling interest (325) (586) Income attributable to minorities 0,94 0,88

headline earnings 4 900 4 277 Headline earnings 0,98% 0,88%

Daily average interest-earning banking

assets 495 930 481 378 multiply multiply

Daily average total assets 579 306 564 921 Interest-earning banking assets/daily average total assets 85,6% 85,2%

= =

return on total assets (roa) 0,82% 0,76%

multiply multiply

Daily average shareholders’ funds 41 551 36 388 gearing (roe/roa) 14,27 15,52

= =

return on ordinary shareholders’ equity (roe) 11,8% 11,8%

roe excluding goodwill 13,4% 13,4%

17b

2010 2009 2010 2009

Net interest income 16 608 16 306

Net interest income/average interest-earning banking

assets 3,35% 3,39%

less

impairments/

Nii less

Impairments/

NII

Impairment of loans and advances (6 188) (6 634) Impairments/average interest-earning banking assets 1,25% 4,76% 37,3% 1,38% 4,48% 40,7%

add add

Non-interest revenue 13 215 11 906

Non-interest revenue/average interest-earning banking

assets 2,66%

NiR/Expenses

79,6% 2,47%

NIR/Expenses

78,8%

income from normal operations 23 635 21 578

less

Efficiency

ratio less Efficiency ratio

Total operating expenses (16 598) (15 100) Total expenses/average interest-earning banking assets 3,35% 55,7% 3,14% 53,5%

add addShare of profits of associates and joint

ventures 1 55 Associate income/average interest-earning banking assets 0,00% 0,01%

net profit before taxation 7 038 6 533 1,41% 1,35%

Indirect taxation (447) (438) mu ltiply multiply

Direct taxation (1 366) (1 232) 1 - effective taxation rate 0,74 0,74

net profit after taxation 5 225 4 863 multiply multiply

Non-controlling interest (325) (586) Income attributable to minorities 0,94 0,88

headline earnings 4 900 4 277 Headline earnings 0,98% 0,88%

Daily average interest-earning banking

assets 495 930 481 378 multiply multiply

Daily average total assets 579 306 564 921 Interest-earning banking assets/daily average total assets 85,6% 85,2%

= =

return on total assets (roa) 0,82% 0,76%

multiply multiply

Daily average shareholders’ funds 41 551 36 388 gearing (roe/roa) 14,27 15,52

= =

return on ordinary shareholders’ equity (roe) 11,8% 11,8%

roe excluding goodwill 13,4% 13,4%


OpERATiONAL SEgMENTAL REpORTiNgFOR THE yEAR ENDED 31 DECEMBER

ConsolIdaTed sTaTeMenT oF FInanCIal posITIon (rm)

Nedbank group Nedbank Capital Nedbank CorporateNedbank Retail and

Business Banking Nedbank RetailNedbank Business

Banking Nedbank Wealth Shared Services Central Management Eliminations

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

asseTsCash and cash equivalents 19 745 18 375 2 732 2 875 1 868 1 807 1 494 1 430 1 494 1 430 327 256 154 194 13 170 11 813 Other short-term securities 27 044 18 550 20 792 12 233 1 357 949 (1) (1) 4 200 3 021 696 2 347 Derivative financial instruments 13 882 12 710 13 790 12 471 (65) 79 13 157 147 Government and other securities 31 824 35 983 12 083 12 519 4 314 4 060 15 427 19 404 Advances and other accounts 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259) Other assets 40 950 34 784 7 578 3 393 5 097 4 811 5 263 5 465 4 567 4 656 696 809 12 524 11 530 6 643 7 371 3 845 2 214 Intergroup assets 95 886 99 454 28 364 29 321 28 364 29 321 3 747 116 (127 997) (128 891)

total assets 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)

equITy and lIabIlITIesAllocated capital 47 814 44 984 5 116 4 678 7 603 7 280 19 683 20 742 16 560 16 525 3 123 4 217 1 445 1 226 1 362 1 177 12 605 9 881 Derivative financial instruments 12 052 11 551 12 006 11 404 20 94 3 3 4 1 26 45 Amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619) Other liabilities 32 308 24 729 13 200 6 398 3 570 2 434 3 357 3 244 2 424 2 237 933 1 007 9 794 8 944 1 718 3 889 669 (180) Intergroup liabilities 27 885 28 100 85 446 78 546 85 446 78 546 11 325 10 635 3 341 2 279 9 331 (127 997) (128 891)Long-term debt instruments 26 104 20 084 666 739 2 2 1 760 2 019 1 760 2 019 23 676 17 324

total equity and liabilities 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)

ConsoliDateD statement oF Comprehensive inCome (rm)

Net interest income 16 608 16 306 1 201 1 260 3 306 3 326 11 611 11 598 9 181 8 791 2 430 2 807 405 422 (156) (187) 241 (113) Impairment charge on loans and advances 6 188 6 634 535 141 307 369 5 320 6 042 5 110 5 758 210 284 25 82 1

Income from lending activities 10 420 9 672 666 1 119 2 999 2 957 6 291 5 556 4 071 3 033 2 220 2 523 380 340 (157) (187) 241 (113) Non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (246) (35) (81) (77)

Operating income 23 635 21 578 2 930 3 355 4 565 4 475 13 644 11 914 10 082 8 180 3 562 3 734 2 338 1 858 244 201 (5) (148) (81) (77)Total expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (72) (68) (81) (77)

Operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (62) (48) (81) (77)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)

Indirect taxation 447 438 23 23 41 28 232 229 210 207 22 22 53 25 94 129 4 4

Profit/(Loss) from operations 6 590 6 040 1 346 1 726 2 028 2 315 2 302 1 483 1 102 (109) 1 200 1 592 814 606 37 (6) 63 (84) Share of profits of associates and joint ventures 1 55 1 (1) 56

Profit/(Loss) before direct taxation 6 591 6 095 1 346 1 726 2 029 2 314 2 302 1 483 1 102 (109) 1 200 1 592 814 662 37 (6) 63 (84) Direct taxation 1 366 1 232 139 277 504 574 717 389 342 (82) 375 471 222 150 (218) (117) 2 (41)

Profit/(Loss) after taxation 5 225 4 863 1 207 1 449 1 525 1 740 1 585 1 094 760 (27) 825 1 121 592 512 255 111 61 (43) Profit attributable to:Non-controlling interest – ordinary shareholders 59 242 5 (3) 29 18 10 25 217 Non-controlling interest – preference shareholders 266 344 266 344

headline earnings 4 900 4 277 1 202 1 452 1 496 1 722 1 585 1 094 760 (27) 825 1 121 592 502 255 111 (230) (604)

selected ratiosAverage interest earning banking assets (Rm) 495 930 481 378 156 864 140 788 158 943 150 871 264 010 256 396 183 756 175 514 80 254 80 882 21 471 22 787 117 126 22 748 22 122 (128 223) (111 712)ROA (%) 0,82 0,76 0,6 0,8 0,9 1,1 0,6 0,4 0,4 1,0 1,4 1,7 1,6 ROE (%) 11,8 11,8 23,5 31,0 19,7 23,7 8,1 5,3 4,6 (0,2) 26,4 26,6 41,0 40,9 Interest margin (%) * 3,35 3,39 0,77 0,89 2,08 2,20 4,40 4,52 5,00 5,01 3,03 3,47 1,89 1,85 Non-interest revenue to total income (%) 44,3 42,2 65,3 64,0 32,1 31,3 38,8 35,4 39,6 36,9 35,6 30,1 82,9 78,3 Non-interest revenue to total expenses (%) 79,6 78,9 145,0 139,2 62,8 71,2 66,2 62,3 68,5 63,7 57,4 57,2 133,1 123,8 Credit loss ratio banking advances (%) 1,36 1,52 1,27 0,36 0,20 0,25 2,18 2,56 2,67 3,17 0,40 0,52 0,15 0,47 Efficiency ratio (%) 55,7 53,5 45,1 45,9 51,2 44,0 58,6 56,8 57,7 58,0 62,0 52,8 62,2 63,2 Efficiency ratio (Excluding BEE) (%) 55,2 53,2 43,5 44,9 50,4 43,5 58,5 56,6 57,7 57,7 61,7 52,6 62,2 63,2 Effective taxation rate (%) 20,7 20,2 10,4 16,0 24,8 24,8 31,2 26,2 31,0 75,2 31,3 29,6 27,3 22,6 Contribution to group economic (loss)/profit (Rm) (289) 57 477 832 421 758 (1 201) (1 654) (1 583) (2 217) 382 563 388 339 62 (45) (436) (173) Number of permanent employees 27 525 27 037 699 695 3 611 3 822 17 863 17 369 15 473 15 140 2 390 2 229 1 896 1 762 3 381 3 372 75 17

* Cluster margins include internal assetsThe comparative results for the segmental reporting for the year ended 31 December 2009 have been restated in line with the group’s implementation of a revised economic capital allocation methodology and as a result of the Imperial Bank Limited integration. The Imperial Bank Limited businesses have been combined with the following segments, Motor Finance Corporation, IBL Supplier Asset Finance with Nedbank Retail and IBL Property Finance with Nedbank Corporate. The restatement has no effect on the group results and ratios, and only changes segment results and ratios.

19b




Banking Nedbank Wealth Shared Services Central Management Eliminations

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

asseTsCash and cash equivalents 19 745 18 375 2 732 2 875 1 868 1 807 1 494 1 430 1 494 1 430 327 256 154 194 13 170 11 813 Other short-term securities 27 044 18 550 20 792 12 233 1 357 949 (1) (1) 4 200 3 021 696 2 347 Derivative financial instruments 13 882 12 710 13 790 12 471 (65) 79 13 157 147 Government and other securities 31 824 35 983 12 083 12 519 4 314 4 060 15 427 19 404 Advances and other accounts 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259) Other assets 40 950 34 784 7 578 3 393 5 097 4 811 5 263 5 465 4 567 4 656 696 809 12 524 11 530 6 643 7 371 3 845 2 214 Intergroup assets 95 886 99 454 28 364 29 321 28 364 29 321 3 747 116 (127 997) (128 891)

total assets 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)

equITy and lIabIlITIesAllocated capital 47 814 44 984 5 116 4 678 7 603 7 280 19 683 20 742 16 560 16 525 3 123 4 217 1 445 1 226 1 362 1 177 12 605 9 881 Derivative financial instruments 12 052 11 551 12 006 11 404 20 94 3 3 4 1 26 45 Amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619) Other liabilities 32 308 24 729 13 200 6 398 3 570 2 434 3 357 3 244 2 424 2 237 933 1 007 9 794 8 944 1 718 3 889 669 (180) Intergroup liabilities 27 885 28 100 85 446 78 546 85 446 78 546 11 325 10 635 3 341 2 279 9 331 (127 997) (128 891)Long-term debt instruments 26 104 20 084 666 739 2 2 1 760 2 019 1 760 2 019 23 676 17 324

total equity and liabilities 608 718 570 703 215 189 198 260 170 274 157 741 273 219 266 216 193 394 185 971 79 825 80 245 33 920 33 909 6 791 7 686 37 322 35 782 (127 997) (128 891)

ConsoliDateD statement oF Comprehensive inCome (rm)

Net interest income 16 608 16 306 1 201 1 260 3 306 3 326 11 611 11 598 9 181 8 791 2 430 2 807 405 422 (156) (187) 241 (113) Impairment charge on loans and advances 6 188 6 634 535 141 307 369 5 320 6 042 5 110 5 758 210 284 25 82 1

Income from lending activities 10 420 9 672 666 1 119 2 999 2 957 6 291 5 556 4 071 3 033 2 220 2 523 380 340 (157) (187) 241 (113) Non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (246) (35) (81) (77)

Operating income 23 635 21 578 2 930 3 355 4 565 4 475 13 644 11 914 10 082 8 180 3 562 3 734 2 338 1 858 244 201 (5) (148) (81) (77)Total expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (72) (68) (81) (77)

Operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (62) (48) (81) (77)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)

Indirect taxation 447 438 23 23 41 28 232 229 210 207 22 22 53 25 94 129 4 4

Profit/(Loss) from operations 6 590 6 040 1 346 1 726 2 028 2 315 2 302 1 483 1 102 (109) 1 200 1 592 814 606 37 (6) 63 (84) Share of profits of associates and joint ventures 1 55 1 (1) 56

Profit/(Loss) before direct taxation 6 591 6 095 1 346 1 726 2 029 2 314 2 302 1 483 1 102 (109) 1 200 1 592 814 662 37 (6) 63 (84) Direct taxation 1 366 1 232 139 277 504 574 717 389 342 (82) 375 471 222 150 (218) (117) 2 (41)

Profit/(Loss) after taxation 5 225 4 863 1 207 1 449 1 525 1 740 1 585 1 094 760 (27) 825 1 121 592 512 255 111 61 (43) Profit attributable to:Non-controlling interest – ordinary shareholders 59 242 5 (3) 29 18 10 25 217 Non-controlling interest – preference shareholders 266 344 266 344

headline earnings 4 900 4 277 1 202 1 452 1 496 1 722 1 585 1 094 760 (27) 825 1 121 592 502 255 111 (230) (604)

selected ratiosAverage interest earning banking assets (Rm) 495 930 481 378 156 864 140 788 158 943 150 871 264 010 256 396 183 756 175 514 80 254 80 882 21 471 22 787 117 126 22 748 22 122 (128 223) (111 712)ROA (%) 0,82 0,76 0,6 0,8 0,9 1,1 0,6 0,4 0,4 1,0 1,4 1,7 1,6 ROE (%) 11,8 11,8 23,5 31,0 19,7 23,7 8,1 5,3 4,6 (0,2) 26,4 26,6 41,0 40,9 Interest margin (%) * 3,35 3,39 0,77 0,89 2,08 2,20 4,40 4,52 5,00 5,01 3,03 3,47 1,89 1,85 Non-interest revenue to total income (%) 44,3 42,2 65,3 64,0 32,1 31,3 38,8 35,4 39,6 36,9 35,6 30,1 82,9 78,3 Non-interest revenue to total expenses (%) 79,6 78,9 145,0 139,2 62,8 71,2 66,2 62,3 68,5 63,7 57,4 57,2 133,1 123,8 Credit loss ratio banking advances (%) 1,36 1,52 1,27 0,36 0,20 0,25 2,18 2,56 2,67 3,17 0,40 0,52 0,15 0,47 Efficiency ratio (%) 55,7 53,5 45,1 45,9 51,2 44,0 58,6 56,8 57,7 58,0 62,0 52,8 62,2 63,2 Efficiency ratio (Excluding BEE) (%) 55,2 53,2 43,5 44,9 50,4 43,5 58,5 56,6 57,7 57,7 61,7 52,6 62,2 63,2 Effective taxation rate (%) 20,7 20,2 10,4 16,0 24,8 24,8 31,2 26,2 31,0 75,2 31,3 29,6 27,3 22,6 Contribution to group economic (loss)/profit (Rm) (289) 57 477 832 421 758 (1 201) (1 654) (1 583) (2 217) 382 563 388 339 62 (45) (436) (173) Number of permanent employees 27 525 27 037 699 695 3 611 3 822 17 863 17 369 15 473 15 140 2 390 2 229 1 896 1 762 3 381 3 372 75 17

* Cluster margins include internal assets


gEOgRApHiCAL SEgMENTAL REpORTiNgFOR THE yEAR ENDED 31 DECEMBER


Nedbank group South Africa * Rest of Africa Rest of world

2010 2009 2010 2009 2010 2009 2010 2009

asseTsCash and cash equivalents 19 745 18 375 16 488 14 536 1 285 1 224 1 972 2 615 Other short-term securities 27 044 18 550 20 488 13 847 1 357 949 5 199 3 754 Derivative financial instruments 13 882 12 710 13 349 12 402 28 79 505 229 Government and other securities 31 824 35 983 29 532 33 929 50 95 2 242 1 959 Loans and advances 475 273 450 301 453 187 425 133 8 843 7 820 13 243 17 348 Other assets 40 950 34 784 37 848 31 617 771 691 2 331 2 476 Intergroup assets (6 676) (9 950) 2 266 1 639 4 410 8 311

total assets 608 718 570 703 564 216 521 514 14 600 12 497 29 902 36 692

Total equity 47 814 44 984 42 350 40 115 1 665 1 446 3 799 3 423 Derivative financial instruments 12 052 11 551 11 506 11 226 20 76 526 249 Amounts owed to depositors 490 440 469 355 462 379 435 956 11 419 9 995 16 642 23 404 Provisions and other liabilities 32 308 24 729 31 469 23 676 521 378 318 675 Intergroup liabilities (9 590) (9 541) 973 600 8 617 8 941 Long-term debt instruments 26 104 20 084 26 102 20 082 2 2

total liabilities 608 718 570 703 564 216 521 514 14 600 12 497 29 902 36 692

ConsolIdaTed sTaTeMenT oF CoMprehensIve InCoMe (rm)

Net interest income 16 608 16 306 15 702 15 440 606 519 300 347 Impairment charge on loans and advances 6 188 6 634 6 372 6 360 33 34 (217) 240

Income from lending activities 10 420 9 672 9 330 9 080 573 485 517 107 Non-interest revenue 13 215 11 906 12 248 10 787 461 375 506 744

Operating income 23 635 21 578 21 578 19 867 1 034 860 1 023 851 Operating expenses 16 450 14 974 15 354 13 947 654 517 442 510 BEE transaction expenses 148 126 145 119 3 7 Indirect taxation 447 438 431 423 12 11 4 4

Profit from operations 6 590 6 040 5 648 5 378 365 325 577 337 Share of profits of associates and joint ventures 1 55 55 1

Profit before direct taxation 6 591 6 095 5 648 5 433 366 325 577 337 Direct taxation 1 366 1 232 1 191 1 080 104 94 71 58

Profit after taxation 5 225 4 863 4 457 4 353 262 231 506 279 Profit attributable to:Non-controlling

interest ordinary shareholders 59 242 29 209 30 18 15 Non-controlling

interest preference shareholders 266 344 266 344

headline earnings 4,900 4,277 4 162 3 800 232 213 506 264

* Includes all group elimination

21b

SEGMENTAL COMMENTARYnedbank group lIMITedSegmental financial results for the year ended 31 December

2010

Headline earnings ROE %

Rm – year ended %

change 20102009

Restated* 20102009

Restated*

Nedbank Capital (17,2) 1 202 1 452 23,5 31,0 Nedbank Corporate (13,1) 1 496 1 722 19,7 23,7 Nedbank Business Banking (26,4) 825 1 121 26,4 26,6 Nedbank Retail >100 760 (27) 4,6 (0,2) Nedbank Wealth 17,9 592 502 41,0 40,9

Operating units 2,2 4 875 4 770 14,4 14,1Centre >100 25 (493)

Group 14,6 4 900 4 277 11,8 11,8

nedbank CapITalNedbank Capital’s return on ordinary shareholders’ equity

(ROE) remained strong in the 2010 financial year at 23,5%.

Headline earnings decreased by 17,2% to R1 202 million (2009:

R1 452 million). The first decrease in six years. Economic profit

of R477 million declined 42,7% as a result of higher capital

allocation and increased cost of equity. Capital allocation

increased from R4 678 million to R5 116 million as the group

realigned economic and regulatory capital utilisation.

The operating environment continued to be challenging, with

corporate and project demand for credit remaining muted.

Average banking advances grew by 6,2% and average deposits

by 16,4%, boosted by negotiable certificates of deposits (NCDs)

and fixed-rate notes (FRNs) as institutional clients sought

higher-yield, longer-dated instruments.

The cluster remains a strong generator of non-interest-revenue

(NIR) as evidenced by the continued improvement in the NIR-to-

expenses ratio from an already high ratio of 139,2% to 145,0%.

Trading income showed strong growth of 14,8%, primarily due

to a significant improvement in the equity trading business. The

foreign exchange business experienced margin compression and

lack of volatility compared with 2009. Income from the advisory

business and private equity decreased as a result of subdued

levels of advisory activity and difficult markets respectively.

Nedbank Capital impairments increased to R535 million due

to a conservative approach to mark-to-market valuation

adjustments in the private equity portfolio. This largely

contributed to a 12,7% decrease in operating income to

R2 930 million for the year.

Total expenses declined by 2,8% to R1 561 million, which

is attributed to tight cost control. This is also reflected in the

efficiency ratio improving to 45,1%, compared with 45,9% in

2009 despite the cluster investing for growth in a number of

systems to improve trading.

nedbank CorporaTe Nedbank Corporate recorded headline earnings of R1 496 million

and an ROE of 19,7%. The negative impact of endowment

contributed to the 13,1% decrease in headline earning (5,7%

excluding the Imperial Bank commercial property book).

Core NIR (excluding the Imperial Bank commercial property

book) grew strongly by 11,9% in line with the cluster’s strategy

of focusing on increasing primary-banker market share,

deepening transactional banking offerings, and embarking on

a cross-sell value proposition. This was further boosted by 20

new transactional banking clients acquired during the year and

a strong increase in electronic banking revenues. Expenses grew

17%, partly as a result of investment spend on innovation to

support NIR growth. This resulted in the NIR-to-expenses ratio

declining to 62,8%.

High-quality credit portfolios, coupled with the strategy of

early identification and proactive client engagement, led to a

credit loss ratio of 0,09% (0,20% including the Imperial Bank

commercial property book), a continued improvement on the

0,25% recorded in 2009 and well within the cluster’s through-

the-cycle target range of 0,20% to 0,35%. The credit loss ratio

improved in all three operating businesses, with Corporate

Banking’s credit loss ratio declining to a negative ratio of 0,17%

to reflect net recoveries and a release from specific provisions,

Nedbank Africa improving from 0,51% to 0,42%, and Property

Finance standing at 0,34% (0,53% including the Imperial Bank

commercial property book).

Average advances for the year grew by 5,1% to R151,4 billion,

while average deposits declined by 6% to R124,1 billion as

a result of corporate clients switching from term deposits

to higher-yielding NCDs during the year, prompted by the

environment of lower interest rates.

The weaker economic environment resulted in limited advances

growth in Corporate Banking of 0,3%. Despite this, the business

generated headline earnings of R826 million and a ROE of 27,6%.

Property Finance achieved 7,9% growth in assets, headline

earnings of R550 million and a ROE of 18,3%.

Nedbank Africa performed well, with average advances up

20,2%. Headline earnings increased by 4,5% to R139 million at

a ROE of 14,6%.


Transactional Banking continued to drive innovation within the

cluster with the successful implementation of cash solutions

such as e-Mall and Currency-Converter, the delivery of the

enhanced electronic banking system and the reengineering of

deposit-taking, while the introduction of eStatements is an

initiative towards increased efficiency and supports Nedbank’s

green positioning.

nedbank reTaIl and busIness bankIngRetail and Business Banking continued to experience a

challenging economic environment, with continued high

consumer indebtedness and muted business demand, despite

interest rates being their lowest in 36 years.

The Imperial Bank integration has progressed well, with earnings,

assets and liabilities transferred to Nedbank’s clusters after the

section 54 approval in October 2010 and adjusted to reflect the

Nedbank economic capital and liquidity principles.

Business continuity was maintained which ensured that

460 people retained their jobs through redeployment within the

greater group. Motor Finance Corporation (MFC), Supplier Asset

Finance and Professional have been incorporated in the Retail

Cluster and Commercial Property in Nedbank Corporate. The

Imperial Bank MFC business was combined with the Nedbank

Vehicle Asset Finance business and has been run as a holistic

retail motor finance business for the whole of 2010. MFC, on a

combined basis, performed strongly in 2010, delivering headline

earnings of R606 million (2009: R309 million).

Shareholder value was enhanced as evidenced through the

correct allocation of capital and liquidity usage, against 100%

of the profits, integration costs of R117 million (of which 43%

has been incurred to date to unlock benefits of R200 million),

increased pricing for risk, and sustaining the combined retail

motor market share in excess of 30%.

nedbank busIness bankIngNedbank Business Banking continued to generate a high

ROE of 26,4% (2009: 26,6%) and strong economic profit of

R382 million (2009: R563 million), delivering consistently high

returns for the sixth successive year. This was achieved despite

the R247 million post-tax lower endowment earnings in 2010,

both from the lower-interest-rate environment and the balance

sheet efficiency exercise during 2009 and 2010 that reduced

capital utilisation by R1,1 billion in 2010 within the cluster.

Headline earnings, aligning the capital base and interest rates to

the 2009 capital ratio and rates respectively, declined by 4,4%,

evidencing sound fundamental performance in the current

economic climate.

The cluster’s focus on deepening its product cross-sell of

transactional products has yielded good results, with fees and

commission earnings up 10,8%, while costs grew at 10,3%

to unlock growth plans after two years of cost growth below

3%. Actual advances growth of 1,3% remained muted, despite

R12 billion in asset payouts, as clients deferred expansion plans

and moderated inventory levels.

The decentralised, accountable business model and localised

client service teams meaningfully contributed to net new

primary-client acquisition, which was up 35% on the previous

year, as well as to improving the credit loss ratio to 0,40%

(2009: 0,52%). The improvement in the credit loss ratio is once

again evidence of the continued effective risk management

practices within the cluster over the past six years. The

sustainability of Business Banking is evident from the R3 billion

in cumulative economic profit generated between 2005 and

2010 on R3,7 billion of average capital while continuing to

invest in staff, clients and communities.

nedbank reTaIlNedbank Retail has been stabilised through rebuilding and

strengthening the leadership team and addressing the

impairment challenges. The business is now positioned well for

a sustainable turnaround following a comprehensive strategic

review of all aspects of the business. The cluster delivered

headline earnings of R760 million (2009: R27 million loss) and

a R634 million reduction in economic losses to R1 583 million

loss (2009: R2 217 million loss). Aligning the capital and

interest rates to 2009 levels and excluding the Imperial Bank

acquisition, Nedbank Retail delivered a R1 billion turnaround in

earnings, with improved performance in most of the underlying

businesses. In particular, the Card and Personal Loans businesses

performed well in 2010 and through the cycle. The objective

is to restore Retail to economic profit neutrality in four years,

based on the current economic outlook.

Impairments have declined as a result of focused strategies on

the collections front, improving arrears status, judicious new

advances growth and focus on both post-writeoff recoveries and

client restructures. The Retail credit loss ratio improved to 2,67%

from 3,17% in 2009, with positive moves in all businesses other

than Retail Relationship Banking (incorporates Small Business

Services and Nedbank Private Bank).

Home Loans continued to feel the effects of business written in

2007/8, with the rehabilitation of the defaulted book remaining

challenging in a more subdued property market. Importantly,

the defaulted portfolio in Home Loans has improved to 10,5%,

down from 12,3% in December 2009. Factors contributing

to this reduction include higher levels of restructured loans

(cumulatively R3,9 billion), lower interest rates, differentiated

security realisation processes, improved collection processes

and tightening of its loan to value. Nedbank has kept over

SEGMENTAL COMMENTARYcontinued

23b

6 900 households in their homes through better management

of defaults.

Lower endowment income of R423 million has been offset to

an extent by continued asset repricing, reduced impairments

and an ongoing drive. in line with group strategy. NIR grew by

16,8% within Retail, boosted by growth of 96 000 in primary

clients, innovative products and volume growth. Reasonable cost

growth of 8,5% includes the impact of distribution expansion of

over 400 ATMs and over 160 outlets. Excluding this expansion,

the business reflects organic cost growth of 7,0%.

Nedbank Retail is being repositioned to be profitable on a

sustainable basis through a greater emphasis on delivering a

choice of distinctive client-centred banking experiences to all

in South Africa, underpinned by worldclass risk management

practices. This requires a significant shift to a more client-

centred, integrated business, and initial actions are yielding

positive results. Importantly, rebuilding scale in Nedbank Retail’s

client franchise will take many years to achieve.

nedbank wealTh Nedbank Wealth delivered strong financial performance in 2010,

with headline earnings up 17,9% to R592 million and ROE of

41,0% (2009: 40,9%).

On a like-for-like basis, adjusting for the acquisition of the

Old Mutual joint ventures in 2009, expense growth was well-

contained at 7,2% and headline earnings growth increased by

16,6%. The acquisition of the joint ventures delivered a return

on investment in excess of original expectations.

Overall NII declined by 3,9% (9,5% like-for-like) as a result of the

low-interest-rate environment, both locally and in the united

Kingdom. NIR grew strongly by 29,0% (12,4% like-for-like)

primarily on the back of the growth in the cluster’s insurance

and asset management businesses. Headline earnings growth

equated to an economic profit of R388 million – up 14,5% on

2009 notwithstanding additional capital allocation from the

centre. This growth is partially inflated by a client loan recovery

of £2,6 million in Fairbairn Private Bank, which impacted in a

favourable overall credit loss ratio for the cluster of 0,15%.

Significant domestic net inflows and strong fund performance

contributed to noteworthy performance from the Asset

Management Business. Total assets under management increased

by 17,6% to R102,6 billion. Internationally, the restructuring of

the business away from alternative hedge funds of funds into

the new best-of-breed range, resulted in a marginal increase in

assets under management, compared with net outflows in 2009.

The Wealth Management Business continued to be negatively

impacted by low uK interest rates and the strength of the rand.

These factors contributed to a decline in NII for Fairbairn Private

Bank of 23,7%.

BoE Private Clients maintained growth in line with CPIX despite

margin pressure, lower stockbroking volumes as well as subdued

investment appetite. This was offset by the more favourable

credit environment.

Advice based sales in the financial planning business rose by

13,9% on the back of increased planner productivity, a more

favourable economic climate and closer collaboration with

Nedbank Group.

The earnings increase in the Insurance Business was driven by a

notable performance in both the life and short-term insurance

businesses. Continued growth in the unsecured lending

businesses in Nedbank Retail contributed to the increased value

of new business of 57,8% and annual premium equivalent

growth of 37,0% for the period under review. The short-term

insurance business achieved gross written premium growth of

10,2%, while managing to keep claims well within acceptable

levels.


NEDBANK CORPORATE SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER

Total Corporate Banking property Finance

property Finance

excluding imperial imperial Africa** Other *

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Headline earnings (Rm) 1 496 1 722 826 870 501 660 550 576 (49) 84 139 133 30 59 ROE (%) 19,7 23,7 27,6 29,3 14,1 19,2 18,3 19,6 (9,0) 16,8 14,6 16,8 28,3 73,8ROA (%) 0,9 1,1 0,6 0,6 0,6 0,8 0,7 0,8 (0,5) 1,0 1,1 1,2 Credit loss ratio banking advances (%) 0,2 0,3 (0,2) 0,1 0,5 0,4 0,3 0,4 1,9 0,5 0,4 0,5 Non-interest revenue to total expenses (%) 62,8 71,2 65,6 66,1 41,1 64,0 50,3 69,1 (23,5) 34,0 61,2 63,1Efficiency ratio (%) 51,2 44,0 52,5 42,9 35,6 33,2 34,7 32,8 43,1 35,8 72,2 69,0

Impairment charge on loans and advances (Rm) 307 369 (119) 80 393 255 222 213 171 42 33 34 –Total assets (Rm) 170 274 157 741 151 274 138 736 96 939 82 506 86 746 72 797 10 193 9 709 13 869 11 821 (91 808) (75 322) Average total assets (Rm) 163 860 154 855 141 969 147 951 85 663 78 110 75 947 69 270 9 716 8 840 13 024 10 838 (76 796) (82 044) Total advances (Rm) 157 703 146 035 69 486 66 440 77 481 71 501 68 742 62 639 8 739 8 862 8 777 7 755 1 959 339 Average total advances (Rm) 151 433 144 055 68 812 68 590 73 881 68 464 64 932 60 153 8 949 8 311 7 943 6 609 797 392 Total deposits (Rm) 131 194 119 831 117 604 107 835 325 87 304 67 21 20 11 419 9 995 1 846 1 914 Average total deposits (Rm) 124 077 131 945 110 467 120 250 319 124 294 85 25 39 11 152 9 342 2 139 2 229 Allocated capital (Rm) 7 603 7 280 2 998 2 965 3 549 3 441 3 004 2 941 545 500 950 794 106 80

* Includes Centralised Credit, Risk, HR, Finance, Shared Services, Transactional Banking and eliminations

** 2009 excludes MBCA

NEDBANK WEALTH SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER

2010 2009

Headline earnings (Rm) 592 502 ROE (%) 41,0 40,9 ROA (%) 1,7 1,6 Credit loss ratio banking advances (%) 0,2 0,5Non-interest revenue to total expenses (%) 133,1 123,8 Efficiency ratio (%) 62,2 63,2 Impairment charge on loans and advances (Rm) 25 82 Assets under management (Rm) 102 570 87 204Life embedded value (EV) (Rm) 1 031 795Life value of new business (Rm) 295 187Total assets (Rm) 33 920 33 909 Average total assets (Rm) 34 063 32 343 Total advances (Rm) 16 869 19 089 Average total advances (Rm) 17 246 17 580 Total deposits (Rm) 11 356 13 100 Average total deposits (Rm) 12 094 14 765 Allocated capital (Rm) 1 445 1 226

25b

Total Corporate Banking property Finance

property Finance

excluding imperial imperial Africa** Other *

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Headline earnings (Rm) 1 496 1 722 826 870 501 660 550 576 (49) 84 139 133 30 59 ROE (%) 19,7 23,7 27,6 29,3 14,1 19,2 18,3 19,6 (9,0) 16,8 14,6 16,8 28,3 73,8ROA (%) 0,9 1,1 0,6 0,6 0,6 0,8 0,7 0,8 (0,5) 1,0 1,1 1,2 Credit loss ratio banking advances (%) 0,2 0,3 (0,2) 0,1 0,5 0,4 0,3 0,4 1,9 0,5 0,4 0,5 Non-interest revenue to total expenses (%) 62,8 71,2 65,6 66,1 41,1 64,0 50,3 69,1 (23,5) 34,0 61,2 63,1Efficiency ratio (%) 51,2 44,0 52,5 42,9 35,6 33,2 34,7 32,8 43,1 35,8 72,2 69,0

Impairment charge on loans and advances (Rm) 307 369 (119) 80 393 255 222 213 171 42 33 34 –Total assets (Rm) 170 274 157 741 151 274 138 736 96 939 82 506 86 746 72 797 10 193 9 709 13 869 11 821 (91 808) (75 322) Average total assets (Rm) 163 860 154 855 141 969 147 951 85 663 78 110 75 947 69 270 9 716 8 840 13 024 10 838 (76 796) (82 044) Total advances (Rm) 157 703 146 035 69 486 66 440 77 481 71 501 68 742 62 639 8 739 8 862 8 777 7 755 1 959 339 Average total advances (Rm) 151 433 144 055 68 812 68 590 73 881 68 464 64 932 60 153 8 949 8 311 7 943 6 609 797 392 Total deposits (Rm) 131 194 119 831 117 604 107 835 325 87 304 67 21 20 11 419 9 995 1 846 1 914 Average total deposits (Rm) 124 077 131 945 110 467 120 250 319 124 294 85 25 39 11 152 9 342 2 139 2 229 Allocated capital (Rm) 7 603 7 280 2 998 2 965 3 549 3 441 3 004 2 941 545 500 950 794 106 80

* Includes Centralised Credit, Risk, HR, Finance, Shared Services, Transactional Banking and eliminations

** 2009 excludes MBCA

NEDBANK WEALTH – NEW BUSiNESS pREMiUM


Rm % change 2010 2009

Credit, Single Life and Simple Investment Products 31,3 1 023.9 780.1 Short-term Insurance 14,8 903.4 786.6 Advice Based Products + 13,9 7 868.7 6 911.4

Life 13,5 1 795.8 1 582.5 Non-Life 22,7 5 867.2 4 780.5 Preference Shares (62,5) 205.7 548.4

total 15,5 9 796,0 8 478,1

+ This does not include business flows from our High Net Worth and Asset Management businesses


NEDBANK RETAIL SEgMENTAL REpORTFOR THE yEAR ENDED 31 DECEMBER

TotalRelationship

banking Small Business

Services private Bank Consumer Banking personal loans

Transactional and investment

products Secured Lending HomeloansMotor Finance Corporation Card Other *

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Headline earnings (Rm) 760 (27) (88) 26 (87) 45 (1) (19) 597 361 495 285 102 76 (297) (769) (903) (1 078) 606 309 561 388 (13) (33)ROE (%) 4,6 (0,2) (6,3) 1,6 (9,2) 4,4 (0,2) (3,3) 17,5 14,0 20,6 16,4 10,0 9,1 (3,4) (8,4) (31,9) (25,4) 10,2 6,3 25,0 19,1 (1,9) (2,9)ROA (%) 0,4 – (0,3) 0,1 (0,5) 0,3 (0,2) 0,9 0,5 5,5 2,7 0,2 0,1 (0,2) (0,6) (1,0) (1,2) 1,3 0,7 6,0 4,4 – 0,1Credit loss ratio banking advances (%) 2,7 3,2 2,6 2,4 4,3 3,4 1,0 1,4 7,6 10,0 7,6 10,3 7,9 8,5 2,3 2,7 2,2 2,6 2,4 3,0 3,7 7,7 1,6 2,0Non-interest revenue to total expenses 68,5 63,7 53,4 49,7 59,2 56,0 39,5 35,5 64,6 58,2 74,0 58,7 62,0 58,1 30,6 23,5 19,6 16,0 41,8 32,1 119,0 121,1 (24,6) (149,0)Efficiency ratio (%) 57,7 58,0 72,6 68,7 71,2 66,4 76,0 74,3 68,9 71,7 35,8 39,6 92,4 92,3 36,1 36,7 51,4 47,0 27,8 29,3 61,3 58,8 (47,6) (6,2)Impairment charge on loans and advances (Rm) 5 110 5 758 674 584 540 413 134 171 929 910 831 801 98 109 3 077 3 526 2 035 2 414 1 042 1 112 287 558 143 180 Total assets (Rm) 193 394 185 971 25 319 24 314 11 732 11 794 13 587 12 520 12 969 9 383 12 004 8 589 965 794 135 597 132 628 89 653 92 278 45 944 40 350 7 840 7 401 11 669 12 245 Average total assets (Rm) 189 386 181 221 25 035 24 000 11 867 11 810 13 168 12 190 11 411 8 288 10 368 7 282 1 043 1 006 133 473 130 052 90 997 93 154 42 476 36 898 7 770 7 296 11 697 11 585 Total advances (Rm) 187 334 179 885 25 277 24 266 11 706 11 766 13 571 12 500 12 545 9 114 11 747 8 344 798 770 134 025 130 855 88 606 91 048 45 419 39 807 7 261 6 731 8 226 8 919Average total advances (Rm) 183 738 175 504 24 972 23 943 11 827 11 772 13 145 12 171 11 102 8 009 10 146 7 037 956 972 131 936 128 240 89 847 91 892 42 089 36 348 7 142 6 664 8 586 8 648Total deposits (Rm) 87 204 86 641 28 050 26 689 17 475 16 098 10 575 10 591 57 821 57 462 3 6 57 818 57 456 453 1 585 2 453 1 583 785 825 95 80 Average total deposits (Rm) 85 559 84 959 26 689 25 611 16 333 15 244 10 356 10 367 57 058 56 584 56 44 57 002 56 540 838 1 645 1 4 837 1 641 871 958 103 161 Allocated capital (Rm) 16 560 16 525 1 390 1 597 952 1 006 438 591 3 422 2 582 2 400 1 744 1 022 838 8 776 9 177 2 827 4 248 5 949 4 929 2 245 2 032 727 1 137

* Includes support divisions, IBL professional finance and IBL supplier asset finance

NEDBANK BuSINESS BANKING SEgMENTAL REpORT FOR THE yEAR ENDED 31 DECEMBER

2010 2009

Headline earnings (Rm) 825 1 121 ROE (%) 26,4 26,6 ROA (%) 1,0 1,4 Credit loss ratio banking advances (%) 0,4 0,5 Non-interest revenue to total expenses (%) 57,4 57,2Efficiency ratio (%) 62,0 52,8Impairment charge on loans and advances (Rm) 210 284 Total assets (Rm) 79 825 80 245 Average total assets (Rm) 80 375 80 821 Total advances (Rm) 50 765 50 115 Average total advances (Rm) 51 179 52 820 Total deposits (Rm) 75 769 75 021 Average total deposits (Rm) 76 218 75 478 Allocated capital (Rm) 3 123 4 217

27b

TotalRelationship

banking Small Business

Services private Bank Consumer Banking personal loans

Transactional and investment

products Secured Lending HomeloansMotor Finance Corporation Card Other *

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Headline earnings (Rm) 760 (27) (88) 26 (87) 45 (1) (19) 597 361 495 285 102 76 (297) (769) (903) (1 078) 606 309 561 388 (13) (33)ROE (%) 4,6 (0,2) (6,3) 1,6 (9,2) 4,4 (0,2) (3,3) 17,5 14,0 20,6 16,4 10,0 9,1 (3,4) (8,4) (31,9) (25,4) 10,2 6,3 25,0 19,1 (1,9) (2,9)ROA (%) 0,4 – (0,3) 0,1 (0,5) 0,3 (0,2) 0,9 0,5 5,5 2,7 0,2 0,1 (0,2) (0,6) (1,0) (1,2) 1,3 0,7 6,0 4,4 – 0,1Credit loss ratio banking advances (%) 2,7 3,2 2,6 2,4 4,3 3,4 1,0 1,4 7,6 10,0 7,6 10,3 7,9 8,5 2,3 2,7 2,2 2,6 2,4 3,0 3,7 7,7 1,6 2,0Non-interest revenue to total expenses 68,5 63,7 53,4 49,7 59,2 56,0 39,5 35,5 64,6 58,2 74,0 58,7 62,0 58,1 30,6 23,5 19,6 16,0 41,8 32,1 119,0 121,1 (24,6) (149,0)Efficiency ratio (%) 57,7 58,0 72,6 68,7 71,2 66,4 76,0 74,3 68,9 71,7 35,8 39,6 92,4 92,3 36,1 36,7 51,4 47,0 27,8 29,3 61,3 58,8 (47,6) (6,2)Impairment charge on loans and advances (Rm) 5 110 5 758 674 584 540 413 134 171 929 910 831 801 98 109 3 077 3 526 2 035 2 414 1 042 1 112 287 558 143 180 Total assets (Rm) 193 394 185 971 25 319 24 314 11 732 11 794 13 587 12 520 12 969 9 383 12 004 8 589 965 794 135 597 132 628 89 653 92 278 45 944 40 350 7 840 7 401 11 669 12 245 Average total assets (Rm) 189 386 181 221 25 035 24 000 11 867 11 810 13 168 12 190 11 411 8 288 10 368 7 282 1 043 1 006 133 473 130 052 90 997 93 154 42 476 36 898 7 770 7 296 11 697 11 585 Total advances (Rm) 187 334 179 885 25 277 24 266 11 706 11 766 13 571 12 500 12 545 9 114 11 747 8 344 798 770 134 025 130 855 88 606 91 048 45 419 39 807 7 261 6 731 8 226 8 919Average total advances (Rm) 183 738 175 504 24 972 23 943 11 827 11 772 13 145 12 171 11 102 8 009 10 146 7 037 956 972 131 936 128 240 89 847 91 892 42 089 36 348 7 142 6 664 8 586 8 648Total deposits (Rm) 87 204 86 641 28 050 26 689 17 475 16 098 10 575 10 591 57 821 57 462 3 6 57 818 57 456 453 1 585 2 453 1 583 785 825 95 80 Average total deposits (Rm) 85 559 84 959 26 689 25 611 16 333 15 244 10 356 10 367 57 058 56 584 56 44 57 002 56 540 838 1 645 1 4 837 1 641 871 958 103 161 Allocated capital (Rm) 16 560 16 525 1 390 1 597 952 1 006 438 591 3 422 2 582 2 400 1 744 1 022 838 8 776 9 177 2 827 4 248 5 949 4 929 2 245 2 032 727 1 137

* Includes support divisions, IBL professional finance and IBL supplier asset finance

NEDBANK CAPITAL SEgMENTAL REpORT


2010 2009

Headline earnings (Rm) 1,202 1 452ROE (%) 23,5 31,0ROA (%) 0,6 0,8Credit loss ratio banking advances (%) 1,3 0,4Non-interest revenue to total expenses (%) 145,0 139,2Efficiency ratio (%) 45,1 45,9Impairment charge on loans and advances (Rm) 535 141Total assets (Rm) 215 189 198 260Average total assets (Rm) 209 211 184 453Total advances (Rm) 62 328 55 315Average total advances (Rm) 63 519 53 076Total deposits (Rm) 184 201 175 041Average total deposits (Rm) 182 637 156 934Allocated capital (Rm) 5 116 4 678


Daily average advances Current impaired Default % ofRm % % % Total

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 118 753 117 754 87,2 84,1 2,3 3,6 10,5 12,3 60,8 63,4 Vehicle & Asset Finance 50 297 44 923 91,0 91,0 4,5 4,1 4,5 4,9 26,8 25,6 Personal Loans 11 628 8 581 85,6 82,9 4,7 5,0 9,6 12,1 6,8 5,3 Card 7 630 7 252 90,3 89,2 3,1 4,0 6,6 6,9 4,0 3,9 Overdrafts and other loans 2 924 2 993 79,1 73,9 1,6 6,0 19,3 20,2 1,6 1,8

Total 191 232 181 503 88,1 85,8 3,1 3,8 8,8 10,3 100,0 100,0

balanCe sheeTimpairment as a % of book Total impairments Current impaired Default % of

Rm % % % Total

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 3 375 3 263 0,3 0,1 7,2 5,4 23,0 18,8 2,8 2,6 Vehicle & Asset Finance 2 162 1 651 0,4 0,4 18,7 8,3 64,8 57,0 4,2 3,5 Personal Loans 916 762 0,1 0,2 18,7 16,6 61,6 55,9 6,9 7,7 Card 564 564 0,5 0,4 12,8 12,4 97,3 100,3 7,2 7,8 Overdrafts and other loans 555 600 0,8 0,7 36,2 13,3 88,4 84,5 18,3 18,3

Total 7 572 6 840 0,3 0,2 13,3 7,5 36,1 30,1 3,8 3,5

InCoMe sTaTeMenTincome statement

impairment charge portfolio impairment Specific impairment post write off Recoveries Credit Loss Ratio *Rm Rm Rm Rm %

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 2 511 2 865 160 32 2 403 2 883 (52) (50) 2,1 2,4 Vehicle & Asset Finance 1 245 1 253 231 (42) 1 090 1 352 (76) (57) 2,5 2,8 Personal Loans 842 810 32 (85) 981 1 015 (171) (120) 7,2 9,4 Card 287 558 (24) 425 702 (138) (120) 3,8 7,7 Overdrafts and other loans 225 272 (7) (8) 251 299 (19) (19) 7,7 9,1

Total 5 110 5 758 416 (127) 5 150 6 251 (456) (366) 2,7 3,2

* Calculated using daily average advances

NEDBANK RETAIL – ADvANCES AND iMpAiRMENTSFOR THE yEAR ENDED 31 DECEMBER

29b

Daily average advances Current impaired Default % ofRm % % % Total

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 118 753 117 754 87,2 84,1 2,3 3,6 10,5 12,3 60,8 63,4 Vehicle & Asset Finance 50 297 44 923 91,0 91,0 4,5 4,1 4,5 4,9 26,8 25,6 Personal Loans 11 628 8 581 85,6 82,9 4,7 5,0 9,6 12,1 6,8 5,3 Card 7 630 7 252 90,3 89,2 3,1 4,0 6,6 6,9 4,0 3,9 Overdrafts and other loans 2 924 2 993 79,1 73,9 1,6 6,0 19,3 20,2 1,6 1,8

Total 191 232 181 503 88,1 85,8 3,1 3,8 8,8 10,3 100,0 100,0

balanCe sheeTimpairment as a % of book Total impairments Current impaired Default % of

Rm % % % Total

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 3 375 3 263 0,3 0,1 7,2 5,4 23,0 18,8 2,8 2,6 Vehicle & Asset Finance 2 162 1 651 0,4 0,4 18,7 8,3 64,8 57,0 4,2 3,5 Personal Loans 916 762 0,1 0,2 18,7 16,6 61,6 55,9 6,9 7,7 Card 564 564 0,5 0,4 12,8 12,4 97,3 100,3 7,2 7,8 Overdrafts and other loans 555 600 0,8 0,7 36,2 13,3 88,4 84,5 18,3 18,3

Total 7 572 6 840 0,3 0,2 13,3 7,5 36,1 30,1 3,8 3,5

InCoMe sTaTeMenTincome statement

impairment charge portfolio impairment Specific impairment post write off Recoveries Credit Loss Ratio *Rm Rm Rm Rm %

Division 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans 2 511 2 865 160 32 2 403 2 883 (52) (50) 2,1 2,4 Vehicle & Asset Finance 1 245 1 253 231 (42) 1 090 1 352 (76) (57) 2,5 2,8 Personal Loans 842 810 32 (85) 981 1 015 (171) (120) 7,2 9,4 Card 287 558 (24) 425 702 (138) (120) 3,8 7,7 Overdrafts and other loans 225 272 (7) (8) 251 299 (19) (19) 7,7 9,1

Total 5 110 5 758 416 (127) 5 150 6 251 (456) (366) 2,7 3,2

* Calculated using daily average advances


OpERATiONAL STATiSTiCS FOR THE yEAR ENDED 31 DECEMBER

nedbank reTaIl

Classification of ClientsNumber of

clients

Number of internet

banking clients

Number of branches

Banking outlets

including kiosks

private bank suites Roving sales

2010 4 832 306 498 006 452 144 18 71

2009 4 166 104 439 609 438 75 18 72

Number of personal

loans kiosks

Number of personal

loans branches

pOS devicesenabled for

cash backNumber of

ATMsNumber of

SSTs

Number of permanentemployees

2010 320 43 6 419 2 283 384 15 473

2009 250 30 3 027 1 874 379 15 140

nedbank CorporaTe

Classification of clientsNumber of

clients

Number of electronic

banking clients/profiles

Number of ATM’sAfrica

Number oflocations/

branches


2010Corporate Banking (turnover > R400m) 546 2 224 5 278 Property Finance 5 212 7 450 Africa 219 942 18 880 83 46 1 404 Other 1 479

Total 225 700 21 104 83 58 3 611

2009Corporate Banking (turnover > R400m) 526 2 791 5 294 Property Finance 5 983 7 537Africa 192 097 16 500 74 47 1 443Other 1 548

Total 198 606 19 291 74 59 3 822

nedbank busIness bankIng

Classification of clientsNumber of

clients*

Number ofelectronic

banking clients/profiles

Number oflocations/

branches**


2010 21 842 18 950 63 2 390

2009 22 657 19 056 67 2 229

* 2010 based on number of client risk groups and not individual entities as per 2009

** 2010 locations were restated to reflect only locations with permanent presence. Clients in various other locations are serviced by roaming teams

31b

ASSETS UNDER MANAgEMENTAT 31 DECEMBER

Rm 2010 2009*

Fair value of funds under management – by typeunit trusts 59 764 48 334Third party 1 563 1 482Private clients 41 243 37 388

102 570 87 204

Fair value of funds under management – by geographySouth Africa 96 371 80 633Rest of world 6 199 6 571

102 570 87 204

2010

Rm Unit trusts Third party private clients Total

Reconciliation of movement in funds under management

– by typeOpening balance at 31 December 2009 as reported 48 334 3 143 42 148 93 625Opening balance adjustments* (1 661) (4 760) (6 421)

Adjusted opening balance at 31 December 2009 48 334 1 482 37 388 87 204Inflows 30 204 727 10 907 41 838Outflows (21 972) (92) (9 989) (32 053)Mark-to-market value adjustment 3 808 (227) 2 937 6 518 Foreign currency translation differences (610) (327) (937)

Closing balance – 31 December 2010 59 764 1 563 41 243 102 570

reconciliation of movement in funds 2010

Rm South AfricaRest of

world Total

reconciliation of movement in funds under management

– by geographyOpening balance at 31 December 2009 as reported 79 107 14 518 93 625Opening balance adjustments* 1 526 (7 947) (6 421)

Adjusted opening balance at 31 December 2009 80 633 6 571 87 204Inflows 40 142 1 696 41 838Outflows (31 053) (1 000) (32 053)Mark-to-market value adjustment 6 649 (131) 6 518 Foreign currency translation differences (937) (937)

Closing balance – 31 December 2010 96 371 6 199 102 570

* Management have identified that assets under administration (AUA) have been incorrectly disclosed as part of managed funds in prior years. As per the

definition of managed funds on behalf of third parties on a fully discretionary basis, these AUA balances should not be included in the group’s managed

funds disclosure. As a result the 2008 closing balance and the 2009 comparative movements have been restated.


EARNiNgS pER SHARE AND WEigHTED AvERAgE SHARESFOR THE yEAR ENDED 31 DECEMBER

Diluted DilutedEarnings per share Basic Basic Headline Headline

December 2010Earnings for the year (Rm) 4 811 4 811 4 900 4 900

Weighted average number of ordinary shares 443 900 061 458 229 105 443 900 061 458 229 105

Earnings per share (cents) 1 084 1 050 1 104 1 069

December 2009Earnings for the year (Rm) 4 826 4 826 4 277 4 277

Weighted average number of ordinary shares 423 428 547 435 070 582 423 428 547 435 070 582

Earnings per share (cents) 1 140 1 109 1 010 983

Basic earnings and headline earnings per share are calculated by dividing the relevant earnings amount by the weighted average

number of shares in issue. Fully diluted basic earnings and fully diluted headline earnings per share are calculated by dividing the

relevant earnings amount by the weighted average number of shares in issue after taking the dilutive impact of potential ordinary

shares to be issued into account (the estimated future dilutive shares arising from the BEE transaction as set out in note 15).

nuMber oF weIghTed average dIluTIve poTenTIal ordInary shares Generally, potential shares are dilutive if the strike price + SBP charge to come < average share price for the period of R131.60 (the

SBP charge to come represents the value of services to be received by Nedbank Group in exchange for these potential shares).

DecemberDecember 2010 2009

Shares (’000)potential

shares

Weighted averagedilutive

shares

Weightedaveragedilutiveshares

traditional schemes 17 933 9 124 7 220

Nedcor share incentive trust (1994) 628 156 545 Nedbank group options scheme (2005) 16 439 8 443 6 220 Matched share scheme 866 525 455

Bee schemes – south africa 27 235 5 139 4 381

Black Business Partners 7 891 775 1 024 Non-executive directors 622 142 171 Retail 1 Corporate 9 930 2 220 1 976 Black Executives 1 275 374 286 Black Management 7 517 1 628 923

Bee schemes – namibia 529 66 42

Black Business Partners 200 Affinity Groups 74 Education 99 LTIP: Black 20 13 10 LTIP: White 46 27 22 Black Management 90 26 10

total 45 697 14 329 11 643

33b

CONSOLIDATED STATEMENT OF FiNANCiAL pOSiTiON BANKiNg/TRADiNg

CATEgORiSATiON AT 31 DECEMBER

2010 2009Rm Banking Trading Elims Total Banking Trading Elims Total

asseTsCash and cash equivalents 8 621 29 8 650 7 860 7 7 867 Other short-term securities 18 067 12 306 (3 329) 27 044 9 151 14 411 (5 012) 18 550 Derivative financial instruments 258 15 673 (2 049) 13 882 250 13 796 (1 336) 12 710 Government and other securities 31 571 4 313 (4 060) 31 824 35 448 4 594 (4 059) 35 983 Loans and advances 455 595 19 678 475 273 436 536 13 765 450 301 Other assets 4 446 5 568 10 014 4 406 1 049 5 455 Customers’ indebtedness for acceptances 1 953 1 953 2 031 2 031 Current taxation receivable 483 483 602 602 Investment securities 11 604 314 11 918 10 748 277 11 025 Non-current assets held for sale 5 5 12 12 Investments in associate companies and joint ventures 936 936 924 924 Deferred taxation asset 15 269 284 82 200 282 Property and equipment 5 799 12 5 811 5 163 15 5 178 Long-term employee benefit assets 2 044 8 2 052 1 860 1 860 Mandatory reserve deposits

with central banks 11 095 11 095 10 508 10 508 Intangible assets 7 492 2 7 494 7 415 7 415 Inter divisional assets 12 022 (12 022) – 10 087 (10 087) –

total assets 559 984 70 194 (21 460) 608 718 532 996 58 201 (20 494) 570 703

ToTal equITy and lIabIlITIesAllocated capital 41 543 2 558 44 101 37 298 2 351 39 649 Non-controlling interest attributable to: ordinary shareholders 153 153 1 849 1 849 preference shareholders 3 560 3 560 3 486 3 486

Total equity 45 256 2 558 – 47 814 42 633 2 351 44 984 Derivative financial instruments 2 168 11 933 (2 049) 12 052 1 502 11 385 (1 336) 11 551 Amounts owed to depositors 454 648 39 129 (3 337) 490 440 439 536 34 839 (5 020) 469 355 Other liabilities 5 887 16 410 (4 052) 18 245 5 735 9 568 (4 051) 11 252 Liabilities under acceptances 1 953 1 953 2 031 2 031 Current taxation liabilities 191 191 315 315 Deferred taxation liabilities 1 640 164 1 804 1 887 58 1 945 Long-term employee benefit liabilities 1 414 1 414 1 304 1 304 Investment contract liabilities 7 309 7 309 6 749 6 749 Insurance contract liabilities 1 392 1 392 1 133 1 133 Long-term debt instruments 26 104 26 104 20 084 20 084 Inter divisional liabilities 12 022 (12 022) – 10 087 (10 087)

total liabilities 514 728 67 636 (21 460) 560 904 490 363 55 850 (20 494) 525 719

total equity and liabilities 559 984 70 194 (21 460) 608 718 532 996 58 201 (20 494) 570 703


NEDBANK GROuP: CATEgORiES OFFiNANCiAL iNSTRUMENTS FOR THE yEAR ENDED 31 DECEMBER 2010

At fair value through profit or loss

Rm TOTALHeld for trading Designated

Available-for-sale financial assets

Held-to-maturityinvestments Loans and receivables

Financial liabilities at amortised cost

Non-financial assets and liabilities

asseTsCash and cash equivalents 8 650 8 650 Other short-term securities 27 044 10 316 12 528 3 639 561 Derivative financial instruments 13 882 13 882 Government and other securities 31 824 288 17 305 827 10 113 3 291 Loans and advances 475 273 19 679 43 088 412 506 Other assets 10 014 5 203 902 3 909 Clients’ indebtedness for acceptances 1 953 1 953 Current taxation receivable 483 483 Investment securities 11 918 314 11 171 433 Non-current assets held for sale 5 5 Investment in associate companies and joint ventures 936 912 24Deferred taxation asset 284 284 Investment property 199 199 Property and equipment 5 612 5 612 Post-employment assets 2 052 2 052 Intangible assets 7 494 7 494 Mandatory reserve deposits with central bank 11 095 11 095

total assets 608 718 49 682 85 906 4 899 10 674 439 451 – 18 106

ToTal equITy and lIabIlITIesOrdinary share capital 449 449 Ordinary share premium 15 522 15 522 Reserves 28 130 28 130

total equity attributable to equity holders 44 101 – – – – – 44 101 Minority shareholders’ equity attributable to ordinary shareholders 153 153 Minority shareholders’ equity attributable to preference shareholders 3 560 3 560

Total equity 47 814 – – – – – 47 814 Derivative financial instruments 12 052 12 052 Amounts owed to depositors 490 440 35 815 90 144 364 481 Other liabilities 18 245 11 795 6 450 Liabilities under acceptances 1 953 1 953 Current taxation liabilities 191 191 Deferred taxation liabilities 1 804 1 804 Post-employment liability 1 414 1 414 Investment contract liabilities 7 309 7 309 Insurance contract liabilities 1 392 1 392 Long-term debt instruments 26 104 7 774 18 330

total liabilities 560 904 59 662 106 619 – – – 389 261 5 362

total equity and liabilities 608 718 59 662 106 619 – – – 389 261 53 176

ClassIFICaTIons In TerMs oF Ias 39A financial asset or financial liability at fair value through profit or loss is an asset or liability held that was either acquired

to sell or repurchase in the short term, or is managed on a portfolio basis for short-term gains, or is a derivative or is an

asset or liability that has been designated for classification and valuation as fair value through profit and loss.

Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are

not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss

and are held at fair value with fair value gains and losses recorded directly within equity and not through profit and loss.

35b


Rm TOTALHeld for trading Designated

Available-for-sale financial assets

Held-to-maturityinvestments Loans and receivables

Financial liabilities at amortised cost


asseTsCash and cash equivalents 8 650 8 650 Other short-term securities 27 044 10 316 12 528 3 639 561 Derivative financial instruments 13 882 13 882 Government and other securities 31 824 288 17 305 827 10 113 3 291 Loans and advances 475 273 19 679 43 088 412 506 Other assets 10 014 5 203 902 3 909 Clients’ indebtedness for acceptances 1 953 1 953 Current taxation receivable 483 483 Investment securities 11 918 314 11 171 433 Non-current assets held for sale 5 5 Investment in associate companies and joint ventures 936 912 24Deferred taxation asset 284 284 Investment property 199 199 Property and equipment 5 612 5 612 Post-employment assets 2 052 2 052 Intangible assets 7 494 7 494 Mandatory reserve deposits with central bank 11 095 11 095

total assets 608 718 49 682 85 906 4 899 10 674 439 451 – 18 106


total equity attributable to equity holders 44 101 – – – – – 44 101 Minority shareholders’ equity attributable to ordinary shareholders 153 153 Minority shareholders’ equity attributable to preference shareholders 3 560 3 560

Total equity 47 814 – – – – – 47 814 Derivative financial instruments 12 052 12 052 Amounts owed to depositors 490 440 35 815 90 144 364 481 Other liabilities 18 245 11 795 6 450 Liabilities under acceptances 1 953 1 953 Current taxation liabilities 191 191 Deferred taxation liabilities 1 804 1 804 Post-employment liability 1 414 1 414 Investment contract liabilities 7 309 7 309 Insurance contract liabilities 1 392 1 392 Long-term debt instruments 26 104 7 774 18 330



Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date that an

entity has the positive intention and ability to hold to maturity.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and

are carried at an accrued value and not fair valued.

Financial liabilities at amortised cost are non-derivative liabilities carried at amortised cost and not fair valued.

Non-financial assets and liabilities are all other assets and liabilities, which fall outside of the scope of IAS 39.


NEDBANK GROuP: CATEgORiES OFFiNANCiAL iNSTRUMENTS continued FOR THE yEAR ENDED 31 DECEMBER 2009


Rm TOTAL Held for trading DesignatedAvailable-for-sale

financial assetsHeld-to-maturity

investments Loans and receivablesFinancial liabilities at amortised cost


asseTsCash and cash equivalents 7 867 7 867 Other short-term securities 18 550 10 316 5 214 2 042 978 Derivative financial instruments 12 710 12 710 Government and other securities 35 983 568 16 029 804 13 444 5 138 Loans and advances 450 301 13 858 37 598 398 845 Other assets 5 455 832 667 3 956 Clients’ indebtedness for acceptances 2 031 2 031 Current taxation receivable 602 602 Investment securities 11 025 273 10 451 301 Non-current assets held for sale 12 12 Investment in associate companies and joint ventures 924 908 16 Deferred taxation asset 282 282 Investment property 211 211 Property and equipment 4 967 4 967 Post-employment assets 1 860 1 860 Intangible assets 7 415 7 415 Mandatory reserve deposits with central bank 10 508 10 508

total assets 570 703 38 557 70 867 3 147 14 422 426 314 – 17 396


total equity attributable to equity holders 39 649 – – – – – 39 649 Minority shareholders’ equity attributable to ordinary shareholders 1 849 1 849 Minority shareholders’ equity attributable to preference shareholders 3 486 3 486

total equity 44 984 – – – – – 44 984 Derivative financial instruments 11 551 11 551 Amounts owed to depositors 469 355 30 037 74 993 364 325 Other liabilities 11 252 4 895 6 357 Liabilities under acceptances 2 031 2 031 Current taxation liabilities 315 315 Deferred taxation liabilities 1 945 1 945 Post-employment liability 1 304 1 304 Investment contract liabilities 6 749 6 749 Insurance contract liabilities 1 133 1 133 Long-term debt instruments 20 084 7 811 12 273



37b


Rm TOTAL Held for trading DesignatedAvailable-for-sale

financial assetsHeld-to-maturity

investments Loans and receivablesFinancial liabilities at amortised cost


asseTsCash and cash equivalents 7 867 7 867 Other short-term securities 18 550 10 316 5 214 2 042 978 Derivative financial instruments 12 710 12 710 Government and other securities 35 983 568 16 029 804 13 444 5 138 Loans and advances 450 301 13 858 37 598 398 845 Other assets 5 455 832 667 3 956 Clients’ indebtedness for acceptances 2 031 2 031 Current taxation receivable 602 602 Investment securities 11 025 273 10 451 301 Non-current assets held for sale 12 12 Investment in associate companies and joint ventures 924 908 16 Deferred taxation asset 282 282 Investment property 211 211 Property and equipment 4 967 4 967 Post-employment assets 1 860 1 860 Intangible assets 7 415 7 415 Mandatory reserve deposits with central bank 10 508 10 508

total assets 570 703 38 557 70 867 3 147 14 422 426 314 – 17 396


total equity attributable to equity holders 39 649 – – – – – 39 649 Minority shareholders’ equity attributable to ordinary shareholders 1 849 1 849 Minority shareholders’ equity attributable to preference shareholders 3 486 3 486

total equity 44 984 – – – – – 44 984 Derivative financial instruments 11 551 11 551 Amounts owed to depositors 469 355 30 037 74 993 364 325 Other liabilities 11 252 4 895 6 357 Liabilities under acceptances 2 031 2 031 Current taxation liabilities 315 315 Deferred taxation liabilities 1 945 1 945 Post-employment liability 1 304 1 304 Investment contract liabilities 6 749 6 749 Insurance contract liabilities 1 133 1 133 Long-term debt instruments 20 084 7 811 12 273




Certain of the group’s reporting ratio calculations have been adjusted. The ratios for, Return on Equity (RoE) and Return on Assets

(RoA) have been restated with the denominator changing from simple average to daily average for equity and total assets values

respectively. The calculation of Credit Loss Ratio (CLR) has been changed from simple average advances to daily average banking

advances (thereby excluding trading advances from the calculation). Comparatives have been restated accordingly. Effects of these

ratio restatements:

Dec 2009 Dec 2009 Dec 2009(Dec 2010

SENS)(June 2010

SENS)(Dec 09

SENS)

Return on equity (ROE) 11,8% 11,8% 11,5%Return on assets (ROA) 0,76% 0,76% 0,75%Credit loss ratio 1,47% 1,47%Credit loss ratio – Banking 1,52% 1,52%

Credit loss ratio %(2) Movement. Dec 2009 Dec 2009 (1) Movement. Dec 2009

on June 2010SENS

(Dec 2010SENS)

(June 2010SENS)

on Dec 2009SENS

(Dec 2009SENS)

Nedbank Capital – 0,36 0,36 0,10 0,26Nedbank Corporate 0,01 0,25 0,24 0,24Nedbank Business Banking – 0,52 0,52 0,52Nedbank Retail (0,23) 3,17 3,40 0,32 3,08Nedbank Wealth – 0,47 0,47 0,47Imperial Bank 2,01 0,04 1,97

Total group – 1,52 1,52 1,47

(1) Effects of changes on December 2009 results as disclosed in the June 2010 SENS as a result of changing the calculation from simple average advances

to daily average banking advances (thereby excluding trading advances from the calculation).

(2) Effects of changes on December 2009 results as disclosed in the Dec 2010 SENS are as a result of the IBL integration The comparative results for the operations segment reporting for the year ended 31 December 2009 has been restated in line with

the group’s implementation of a revised economic capital allocation methodology and as a result of the Imperial Bank Limited

integration. The restatement has no effect of the group results and ratios, and only changes segment cluster results and ratios.

Effects of changes is as follows:

Headline Earnings (Rm)

(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009on June 2010

SENS(Dec 2010

SENS)(June 2010

SENS)on Dec 2009

SENS(Dec 2009

SENS)

Nedbank Capital 5 1 452 1 447 98 1 349 Nedbank Corporate 96 1 722 1 626 92 1 534 Nedbank Business Banking 8 1 121 1 113 58 1 055 Nedbank Retail 463 (27) (490) 146 (636) Nedbank Wealth 4 502 498 18 480 Imperial Bank (201) 201 201 Shared Services (41) 111 152 19 133 Central Management (334) (604) (270) (431) 161

Total group – 4 277 4 277 – 4 277

RESTATEMENTSFOR THE yEAR ENDED 31 DECEMBER 2009

39b

Operating income (Rm)(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009

on June 2010SENS

(Dec 2010SENS)

(June 2010SENS)

on Dec 2009SENS

(Dec 2009SENS)

Nedbank Capital 9 3 355 3 346 141 3 205 Nedbank Corporate 212 4 475 4 263 134 4 129 Nedbank Business Banking 12 3 734 3 722 85 3 637 Nedbank Retail 1 207 8 180 6 973 213 6 760 Nedbank Wealth 4 1 858 1 854 29 1 825 Imperial Bank (1 275) 1 275 1 275 Shared Services 6 201 195 195 Central Management (175) (148) 27 (602) 629 Eliminations (77) (77) (77)

Total group – 21 578 21 578 – 21 578

Total assets (Rm)(4) Movement. Dec 2009 Dec 2009 (3) Movement. Dec 2009

on June 2010SENS

(Dec 2010SENS)

(June 2010SENS)

on Dec 2009SENS

(Dec 2009SENS)

Nedbank Capital 198 260 198 260 1 700 196 560 Nedbank Corporate 9 135 157 741 148 606 148 606 Nedbank Business Banking 80 245 80 245 859 79 386 Nedbank Retail 42 023 185 971 143 948 143 948 Nedbank Wealth 33 909 33 909 33 909 Imperial Bank (55 660) 55 660 55 660 Shared Services 255 7 686 7 431 7 431 Central Management 3 914 35 782 31 868 (2 619) 34 487 Eliminations 333 (128 891) (129 224) 60 (129 284)

Total group – 570 703 570 703 – 570 703

(3) - Effects of changes on December 2009 results as disclosed in the June 2010 SENS as a result of revised economic capital allocation methodology

(4) - Effects of changes on December 2009 results as disclosed in the Dec 2010 SENS as a result of the allocated economic capital charges and IBL

integration


NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME FOR THE yEAR ENDED 31 DECEMBER

1 average bankIng balanCe sheeT and relaTed InTeresT2010 2009

Averagebalance

Margin statement interest

Averagebalance

Margin statement interestRm

Assets Received % Assets Received %

average prime rate 9,90 11,88 Advances and Clients’ indebtedness for acceptances

Homeloans (including PIPs) 146 426 11 962 8,2 144 197 14 456 10,0 Commercial mortgages 81 936 7 686 9,4 76 648 8 330 10,9 Lease and instalment debtors 65 400 7 303 11,2 61 539 7 655 12,4 Credit card balances 7 733 1 106 14,3 7 347 1 188 16,2 Bills and acceptances * 1 955 20 1,0 2 598 41 1,6 Overdrafts 13 230 1 331 10,1 13 366 1 577 11,8 Term loans and other ** 139 256 11 304 8,1 133 519 13 040 9,8 Impairment of loans and advances (10 628) (8 917)

Government and public sector securities 34 923 2 929 8,4 36 815 3 442 9,3 Short-term funds and trading securities 15 699 736 4,7 14 266 808 5,7

interest-earning banking assets 495 930 44 377 8,9 481 378 50 537 10,5 Net inter divisional assets – trading book (666) 762 Revaluation of FVTPL designated assets 1 442 606 Trading investments (12) (129)Derivative financial instruments 93 148 Insurance assets 8 435 6 796 Cash and bank notes 2 083 1 867 Other assets 7 123 5 649 Associates and Investments 2 984 2 842 Property and equipment 5 399 4 689 Intangible assets 7 387 6 571 Mandatory reserve deposit with central banks 11 766 11 055

total banking assets 541 964 44 377 8,2 522 234 50 537 9,7

Liabilities paid % Liabilities Paid %

Deposit and loan accounts 238 284 13 955 5,9 249 736 19 585 7,8 Current and savings accounts 56 878 788 1,4 55 623 1 188 2,1 Negotiable certificates of deposit 111 230 8 319 7,5 100 163 9 656 9,6 Other interest-bearing liabilities *** 42 264 2 420 5,7 40 623 2 161 5,3 Long-term debt instruments 25 696 2 287 8,9 16 478 1 641 10,0

interest-bearing banking liabilities 474 352 27 769 5,9 462 623 34 231 7,4 Other liabilities 11 317 10 340 Revaluation of FVTPL designated liabilties 1 442 606 Derivative financial instruments 1 445 1 052 Investment contract liabilities 8 257 6 702 Ordinary shareholders’ equity 41 305 35 697 Minority shareholders’ equity 3 846 5 214

total shareholders’ equity and banking liabilities 541 964 27 769 5,1 522 234 34 231 6,6

interest margin on average interest-earning banking assets 495 930 16 608 3,35 481 378 16 306 3,39

Where possible, averages are calculated on daily balances.

* Includes: clients’ indebtedness for acceptances

** Includes: term loans, preference shares, factoring debtors, other lending-related instruments and interest on derivatives

*** Includes: foreign currency liabilities and liabilities under acceptances

41b

2 IMpaIrMenT oF loans and advanCesRm 2010 2009

Opening balance 9 798 7 859

Specific impairment 7 830 5 542

Specific impairment excluding discounts 6 690 4 566 Specific impairment for discounted cash flow losses 1 140 976

Portfolio impairment 1 968 2 317

Income statement impairment charge (net of recoveries) 6 188 6 634

Specific impairment 5 802 6 798 Net increase in impairment for discounted cash flow losses 192 164 Portfolio impairment 194 (328)

Recoveries 763 457 Amounts written off/other transfers (5 523) (5 152)

Specific impairments (5 515) (5 131)Portfolio impairment (8) (21)

Total impairments 11 226 9 798

Specific impairment 9 072 7 830

Specific impairment excluding discounts 7 740 6 690 Specific impairment for discounted cash flow losses 1 332 1 140

Portfolio impairment 2 154 1 968

total advances 486 499 460 099

Details on segmental impairments and defaulted loans and advances are disclosed in the

credit risk section on pages 82b to 96b.

Reconciliation of specific impairment for discounted cash flow lossesRm

Opening balance 1 140 976 Net increase in impairment for discounted cash flow losses 192 164

Interest on specifically impaired loans and advances (1 704) (1 827)Net specific impairment charge for discounted cash flow losses 1 896 1 991

Closing balance 1 332 1 140


NOTES TO THE CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOME continued FOR THE yEAR ENDED 31 DECEMBER

3 non-InTeresT revenue



Banking Nedbank Wealth Shared Services

Central Management and

Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Commission and fees income 9 758 8 583 246 333 1 294 1 162 7 094 6 183 5 862 5 070 1 232 1 113 1 130 917 18 25 (24) (37)

Administration fees 336 217 30 24 259 197 253 182 6 15 52 7 6 (12) (10)Cash handling fees 630 530 172 150 458 380 164 121 294 259 Insurance commission 525 276 3 3 407 170 403 156 4 14 115 103 Exchange commission 300 302 99 104 160 147 57 57 103 90 38 46 3 5 Fees 1 254 1 136 218 252 270 282 52 30 52 30 728 582 (2) 2 (12) (12)Guarantees 122 118 2 79 73 43 43 10 8 33 35 Card income 2 097 1 937 5 1 2 008 1 881 1 954 1 830 54 51 84 55 Service charges 2 680 2 350 120 105 2 552 2 239 2 116 1 835 436 404 8 6 Other commission 1 814 1 717 28 79 516 420 1 155 1 096 905 881 250 215 105 125 10 12 (15)

Insurance income 860 615 860 615 Securities dealing and Fair value adjustments (300) 298 (65) 235 28 94 29 7 35 (6) 7 (15) (19) (1) (1) (276) (18)

Securities dealing (42) 254 (97) 259 84 22 (1) (3) (1) (3) (15) (19) (1) (1) (12) (4)Fair value adjustments (258) 44 32 (24) (56) 72 30 10 35 (5) 10 (264) (14)

Trading Income 2 096 1 841 1 879 1 637 76 94 141 122 50 46 91 76 (12)

Foreign exchange 1 040 1 167 823 951 76 94 141 122 50 46 91 76 Debt securities 774 764 774 764 Equities 276 (108) 276 (96) (12)Commodities 6 18 6 18

Rental income 51 52 17 18 (1) (3) (1) (3) 1 34 37 Investment income 265 64 194 18 51 29 12 11 1 2 11 9 5 5 1 3

Long-term assets sales 11 14 11 9 11 9 5 Dividends received 254 50 194 18 51 29 1 2 1 2 5 1 3

Sundry income 485 454 10 13 100 121 78 38 64 32 14 6 (18) 345 326 (30) (44)

Non-banking subsidiary 185 204 185 204 Other sundry income 300 250 10 13 100 121 78 38 64 32 14 6 (18) 160 122 (30) (44)

Foreign currency translation losses (1) (1)

total non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (327) (112)

3.1 private equity income included in nirNedbank group Nedbank Capital Nedbank Corporate

Rm 2010 2009 2010 2009 2010 2009

Securities dealing 3 268 (46) 251 49 17 Investment income – dividends received 225 36 194 18 31 18

total private equity nir 228 304 148 269 80 35

Realised 230 109 214 72 16 37 unrealised (2) 195 (66) 197 64 (2)


43b

3 non-InTeresT revenue





Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Commission and fees income 9 758 8 583 246 333 1 294 1 162 7 094 6 183 5 862 5 070 1 232 1 113 1 130 917 18 25 (24) (37)

Administration fees 336 217 30 24 259 197 253 182 6 15 52 7 6 (12) (10)Cash handling fees 630 530 172 150 458 380 164 121 294 259 Insurance commission 525 276 3 3 407 170 403 156 4 14 115 103 Exchange commission 300 302 99 104 160 147 57 57 103 90 38 46 3 5 Fees 1 254 1 136 218 252 270 282 52 30 52 30 728 582 (2) 2 (12) (12)Guarantees 122 118 2 79 73 43 43 10 8 33 35 Card income 2 097 1 937 5 1 2 008 1 881 1 954 1 830 54 51 84 55 Service charges 2 680 2 350 120 105 2 552 2 239 2 116 1 835 436 404 8 6 Other commission 1 814 1 717 28 79 516 420 1 155 1 096 905 881 250 215 105 125 10 12 (15)

Insurance income 860 615 860 615 Securities dealing and Fair value adjustments (300) 298 (65) 235 28 94 29 7 35 (6) 7 (15) (19) (1) (1) (276) (18)

Securities dealing (42) 254 (97) 259 84 22 (1) (3) (1) (3) (15) (19) (1) (1) (12) (4)Fair value adjustments (258) 44 32 (24) (56) 72 30 10 35 (5) 10 (264) (14)

Trading Income 2 096 1 841 1 879 1 637 76 94 141 122 50 46 91 76 (12)

Foreign exchange 1 040 1 167 823 951 76 94 141 122 50 46 91 76 Debt securities 774 764 774 764 Equities 276 (108) 276 (96) (12)Commodities 6 18 6 18

Rental income 51 52 17 18 (1) (3) (1) (3) 1 34 37 Investment income 265 64 194 18 51 29 12 11 1 2 11 9 5 5 1 3

Long-term assets sales 11 14 11 9 11 9 5 Dividends received 254 50 194 18 51 29 1 2 1 2 5 1 3

Sundry income 485 454 10 13 100 121 78 38 64 32 14 6 (18) 345 326 (30) (44)

Non-banking subsidiary 185 204 185 204 Other sundry income 300 250 10 13 100 121 78 38 64 32 14 6 (18) 160 122 (30) (44)

Foreign currency translation losses (1) (1)

total non-interest revenue 13 215 11 906 2 264 2 236 1 566 1 518 7 353 6 358 6 011 5 147 1 342 1 211 1 958 1 518 401 388 (327) (112)

3.1 private equity income included in nirNedbank group Nedbank Capital Nedbank Corporate

Rm 2010 2009 2010 2009 2010 2009



Realised 230 109 214 72 16 37 unrealised (2) 195 (66) 197 64 (2)




4 expenses





Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Staff costs 8 794 7 898 736 767 1 263 1 192 4 579 4 103 3 628 3 272 951 831 738 562 1 522 1 348 (44) (74)

Salaries and wages 8 716 7 900 Long-term employee benefits (44) (15)Share-based payment expenses – employees 122 13

Computer processing 2 135 1 993 98 111 192 138 438 418 381 355 57 63 71 75 1 333 1 251 3 –

Depreciation for computer equipment 337 340 Amortisation of computer software 496 456 Operating lease charges for computer equipment 167 137 Other computer processing expenses 1 135 1 060

Communication and travel 671 633 91 75 125 158 336 321 299 286 37 35 43 34 110 79 (34) (34)

Depreciation for vehicles 8 4 Other communication and travel 663 629

Occupation and accommodation 1 392 1 262 52 48 177 151 1 064 982 964 896 100 86 81 98 14 (18) 4 1

Depreciation for owner-occupied land and buildings 106 81 Operating lease charges for land and buildings 526 527 Other occupation and accommodation expenses 760 654

Marketing and public relations * 1 009 861 67 46 56 47 487 435 434 392 53 43 81 38 350 324 (32) (29)Fees and insurances 1 592 1 407 118 111 428 285 576 526 549 477 27 49 115 110 273 327 82 48 Office equipment and consumables 357 340 6 7 69 85 202 186 190 176 12 10 18 15 62 46 1

Depreciation for furniture and equipment 263 207 Operating lease charges for furniture and equipment 11 26 Other office equipment and consumables 83 107

Other sundries * 436 542 18 22 52 57 320 358 302 337 18 21 15 68 35 38 (4) (1)Amortisation of intangible assets** 64 38 64 38 Activity-justified transfer-pricing – – 320 384 93 (7) 3 088 2 831 2 014 1 857 1 074 974 243 188 (3 626) (3 359) (118) (37)

operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (143) (125)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)

BEE share-based payments expenses 143 114 Fees 5 12

total operating expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (153) (145)

* 2009 comparative information has been restated for Imperial Bank Limited joint ventures and alliance management fees of R28 million previously

disclosed in marketing and public relations line

** Amortisation charge for client relationships, contractual rights and other intangible assets

45b

4 expenses





Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Staff costs 8 794 7 898 736 767 1 263 1 192 4 579 4 103 3 628 3 272 951 831 738 562 1 522 1 348 (44) (74)

Salaries and wages 8 716 7 900 Long-term employee benefits (44) (15)Share-based payment expenses – employees 122 13

Computer processing 2 135 1 993 98 111 192 138 438 418 381 355 57 63 71 75 1 333 1 251 3 –

Depreciation for computer equipment 337 340 Amortisation of computer software 496 456 Operating lease charges for computer equipment 167 137 Other computer processing expenses 1 135 1 060

Communication and travel 671 633 91 75 125 158 336 321 299 286 37 35 43 34 110 79 (34) (34)

Depreciation for vehicles 8 4 Other communication and travel 663 629

Occupation and accommodation 1 392 1 262 52 48 177 151 1 064 982 964 896 100 86 81 98 14 (18) 4 1

Depreciation for owner-occupied land and buildings 106 81 Operating lease charges for land and buildings 526 527 Other occupation and accommodation expenses 760 654

Marketing and public relations * 1 009 861 67 46 56 47 487 435 434 392 53 43 81 38 350 324 (32) (29)Fees and insurances 1 592 1 407 118 111 428 285 576 526 549 477 27 49 115 110 273 327 82 48 Office equipment and consumables 357 340 6 7 69 85 202 186 190 176 12 10 18 15 62 46 1

Depreciation for furniture and equipment 263 207 Operating lease charges for furniture and equipment 11 26 Other office equipment and consumables 83 107

Other sundries * 436 542 18 22 52 57 320 358 302 337 18 21 15 68 35 38 (4) (1)Amortisation of intangible assets** 64 38 64 38 Activity-justified transfer-pricing – – 320 384 93 (7) 3 088 2 831 2 014 1 857 1 074 974 243 188 (3 626) (3 359) (118) (37)

operating expenses 16 450 14 974 1 506 1 571 2 455 2 106 11 090 10 160 8 761 8 048 2 329 2 112 1 469 1 226 73 36 (143) (125)BEE transaction expenses 148 126 55 35 41 26 20 42 9 34 11 8 2 1 40 42 (10) (20)

BEE share-based payments expenses 143 114 Fees 5 12

total operating expenses 16 598 15 100 1 561 1 606 2 496 2 132 11 110 10 202 8 770 8 082 2 340 2 120 1 471 1 227 113 78 (153) (145)

* 2009 comparative information has been restated for Imperial Bank Limited joint ventures and alliance management fees of R28 million previously

disclosed in marketing and public relations line

** Amortisation charge for client relationships, contractual rights and other intangible assets



5 TaxaTIon ChargeRm 2010 2009

south african normal taxationCurrent 1 547 1 413 Deferred (248) (369)Secondary taxation on companies (STC) 33 66 Foreign taxation 57 149

Current and deferred taxation on income 1 389 1 259 Prior year overprovision – current (68) 112 Prior year underprovision – deferred 45 (139)

Total taxation on income 1 366 1 232 Tax on non-trading and capital items (2) 75

total 1 364 1 307

effective taxation rate excluding non-trading and capital items (%) 20,7 20,2

%

taxation rate reconciliation (excluding non-trading and capital items)standard rate of south african normal taxation 28,0 28,0 Non-taxable dividend income (4,9) (5,8)Capital items (1,0) (0,9)Structured deals (0,3) (2,0)STC 0,5 1,1Other (1,6) (0,2)

Total taxation on income as percentage of profit before taxation (excluding non-trading and capital items) 20,7 20,2

6 non-ConTrollIng InTeresT – ordInary shareholders

2010 2009Balance income Balance Income

Rm sheet statement sheet statement

Imperial Bank (100% acquired 5 February 2010) 25 1 738 215 Nedbank (Swaziland) 100 23 70 17 Nedbank (Namibia) various subsidiaries 6 2 6 1 Nedbank (Malawi) 3 * 3 * Fairbairn Private Bank (Jersey) (100% acquired

1 June 2009) 15 MBCA Bank (Zimbabwe) 34 4 27 * BoE Private Clients (100% acquired 1 June 2009) (5)Ideas Nedbank AIIF Investors Trust 10 5 5 (1)

Other 153 59 1 849 242

* Less than R1 million

47b

7 preFerenCe shares

Dividends declaredNumber of

sharesCents per

share Amount (Rm)2009Nedbank – Final declared for 2008 – paid March 2009 312 781 032 58,26844 182 Imperial – Final declared for 2008 – paid March 2009 3 000 000 545,32877 16 Nedbank – Interim declared for 2009 – paid Sept 2009 312 781 032 48,98630 153 Imperial – Interim declared for 2009 – paid Sept 2009 3 000 000 457,20548 14

365 2010Nedbank – Final declared for 2009 – paid March 2010 358 277 491 40,15068 144 Imperial – Final declared for 2009 – paid March 2010 3 000 000 374,73973 11 Nedbank – Interim declared for 2010 – payable Sept 2010 358 277 491 38,05479 136

2912010Nedbank – Final declared for 2010 – payable March 2011 358 277 491 36,20548 130

Dividends declared calculations Days Rate Amount (Rm)2009nedbank1 Jul 2010 – 31 Dec 2010 184 129,7 1 Jul 2010 – 9 Sept 2010 71 7,500% 52,3 10 Sept 2010 – 18 Nov 2010 70 7,125% 48,9 19 Nov 2010 – 31 Dec 2010 43 6,750% 28,5

total declared 129,7 Dividends paid calculations Days Rate Amount (Rm)2010 (paid march 2010)nedbank1 Jan 2009 – 30 Jun 2009 184 143,8 1 Jul 2009 – 13 Aug 2009 44 8,250% 35,6 14 Aug 2009 – 31 Dec 2009 140 7,875% 108,2 imperial1 Jan 2009 – 30 Jun 2009 184 11,2 1 Jul 2009 – 13 Aug 2009 44 7,700% 2,8 14 Aug 2009 – 31 Dec 2009 140 7,350% 8,4 2010 (Paid September 2010)nedbank1 Jan 2009 – 30 Jun 2009 181 136,3 1 Jan 2010 – 25 Mar 2010 84 7,875% 64,9 26 Mar 2010 – 30 Jun 2010 97 7,500% 71,4

total paid 291,3 less: Cumulative dividend paid 14,2 less: Dividend paid to group entities 11,2 profit attributable to preference shareholders 265,9 2009 (paid march 2009)nedbank1 Jul 2008 – 31 Dec 2008 184 182,1 1 Jul 2008 – 14 Dec 2008 167 11,625% 165,8 15 Dec 2008 – 31 Dec 2008 17 11,250% 16,3 imperial1 Jul 2008 – 31 Dec 2008 184 16,3 1 Jul 2008 – 14 Dec 2008 167 10,850% 14,8 15 Dec 2008 – 31 Dec 2008 17 10,500% 1,5 2009 (Paid September 2009)nedbank1 Jan 2009 – 30 Jun 2009 181 153,2 1 Jan 2009 – 8 Feb 2009 39 11,250% 37,6 9 Feb 2009 – 24 Mar 2009 44 10,500% 39,6 25 Mar 2009 – 3 May 2009 40 9,750% 33,4 4 May 2009 – 28 May 2009 25 9,000% 19,3 29 May 2009 – 30 Jun 2009 33 8,250% 23,3 imperial1 Jan 2009 – 30 Jun 2009 181 13,7 1 Jan 2009 – 8 Feb 2009 39 10,500% 3,4 9 Feb 2009 – 24 Mar 2009 44 9,800% 3,6 25 Mar 2009 – 3 May 2009 40 9,100% 3,0 4 May 2009 – 28 May 2009 25 8,400% 1,7 29 May 2009 – 30 Jun 2009 33 7,700% 2,0

total paid 365,3 less: Dividend paid to group entities 12,2 less: non-controlling – ordinary shareholders’ share of dividend paid 8,9 profit attrributable to preference shareholders 344,2


NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON AT 31 DECEMBER

8 loans and advanCes

segmental breakdown Nedbank group Nedbank Capital Nedbank Corporate Nedbank Retail and

Business Banking Nedbank Retail Nedbank Business



Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans** 145 895 144 921 2 654 2 239 129 714 130 032 115 578 115 801 14 136 14 231 13 733 12 846 (206) (196)Commercial mortgages** 86 100 80 672 72 461 67 368 13 504 13 130 2 217 2 090 11 287 11 040 312 339 (177) (165)Properties in possession 662 887 5 2 639 880 631 871 8 9 18 5 Credit cards 7 910 7 334 7 890 7 314 7 835 7 263 55 51 20 20 Overdrafts 13 307 11 093 12 4 868 2 819 8 334 8 177 2 076 2 155 6 258 6 022 93 97 Term loans 74 605 68 321 4 323 4 336 55 121 52 538 14 555 10 484 13 109 9 783 1 446 701 610 967 (4) (4)

Personal loans 13 001 9 508 478 413 12 522 9 093 12 518 9 091 4 2 1 2 Other term loans 61 604 58 813 4 323 4 336 54 643 52 125 2 033 1 391 591 692 1 442 699 609 965 (4) (4)

Overnight loans 12 552 12 420 1 1 11 887 11 661 664 758 1 664 757 Other loans to clients 42 897 43 203 33 019 31 743 3 239 1 933 4 200 4 730 375 421 3 825 4 309 1 874 4 667 (5) 121 570 9

Foreign client lending 6 715 6 761 5 133 5 562 1 619 887 155 312 1 1 154 311 (192) Remittances in transit 108 107 (1) 119 78 (5) 31 (9) 30 4 1 1 (5) (3) Other loans * 36 074 36 335 27 887 26 181 1 501 968 4 050 4 387 383 390 3 667 3 997 1 874 4 666 124 762 9

Leases and instalment debtors 67 881 64 128 47 147 3 957 3 616 63 642 60 150 53 085 48 340 10 557 11 810 258 239 (23) (24)Preference shares and debentures 20 499 16 633 14 863 11 168 4 880 5 059 583 226 583 226 55 61 118 119 Factoring accounts 3 202 2 179 3 202 2 179 3 202 2 179

Deposits placed under reverse repurchase agreements 10 849 8 026 10 849 8 026

Trade, other bills and bankers’ acceptances 140 282 137 278 3 4

Loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)Impairment of advances (11 226) (9 798) (923) (384) (1 369) (1 200) (8 828) (8 060) (7 572) (6 840) (1 256) (1 220) (107) (156) (1) 2 2

total loans and advances 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259)

Comprises: Loans and advances to clients 469 021 448 155 49 801 48 529 156 461 146 723 246 932 238 027 194 915 186 694 52 017 51 333 15 549 15 013 124 278 (261) Loans and advances to banks 17 478 11 944 13 450 7 170 2 611 512 (5) 33 (9) 31 4 2 1 427 4 232 (5) (3)

loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)

* Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital and other loans in Nedbank Corporate and

Nedbank Retail

** Comparative results have been restated for the prior year’s disclosure within Imperial Bank Limited. Mortgage loans as migrated to the property

asset finance book have been reclassified from homeloans to commercial mortgages, and mortgage loans as migrated to Nedbank Retail

have been reclassified from commercial to homeloans, in line with the group’s reporting. The net result of the reclassification is a R4,2 billion

adjustment from homeloans to commercial mortgages.

49b

8 loans and advanCes

segmental breakdown Nedbank group Nedbank Capital Nedbank Corporate Nedbank Retail and

Business Banking Nedbank Retail Nedbank Business



Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Homeloans** 145 895 144 921 2 654 2 239 129 714 130 032 115 578 115 801 14 136 14 231 13 733 12 846 (206) (196)Commercial mortgages** 86 100 80 672 72 461 67 368 13 504 13 130 2 217 2 090 11 287 11 040 312 339 (177) (165)Properties in possession 662 887 5 2 639 880 631 871 8 9 18 5 Credit cards 7 910 7 334 7 890 7 314 7 835 7 263 55 51 20 20 Overdrafts 13 307 11 093 12 4 868 2 819 8 334 8 177 2 076 2 155 6 258 6 022 93 97 Term loans 74 605 68 321 4 323 4 336 55 121 52 538 14 555 10 484 13 109 9 783 1 446 701 610 967 (4) (4)

Personal loans 13 001 9 508 478 413 12 522 9 093 12 518 9 091 4 2 1 2 Other term loans 61 604 58 813 4 323 4 336 54 643 52 125 2 033 1 391 591 692 1 442 699 609 965 (4) (4)

Overnight loans 12 552 12 420 1 1 11 887 11 661 664 758 1 664 757 Other loans to clients 42 897 43 203 33 019 31 743 3 239 1 933 4 200 4 730 375 421 3 825 4 309 1 874 4 667 (5) 121 570 9

Foreign client lending 6 715 6 761 5 133 5 562 1 619 887 155 312 1 1 154 311 (192) Remittances in transit 108 107 (1) 119 78 (5) 31 (9) 30 4 1 1 (5) (3) Other loans * 36 074 36 335 27 887 26 181 1 501 968 4 050 4 387 383 390 3 667 3 997 1 874 4 666 124 762 9

Leases and instalment debtors 67 881 64 128 47 147 3 957 3 616 63 642 60 150 53 085 48 340 10 557 11 810 258 239 (23) (24)Preference shares and debentures 20 499 16 633 14 863 11 168 4 880 5 059 583 226 583 226 55 61 118 119 Factoring accounts 3 202 2 179 3 202 2 179 3 202 2 179

Deposits placed under reverse repurchase agreements 10 849 8 026 10 849 8 026

Trade, other bills and bankers’ acceptances 140 282 137 278 3 4

Loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)Impairment of advances (11 226) (9 798) (923) (384) (1 369) (1 200) (8 828) (8 060) (7 572) (6 840) (1 256) (1 220) (107) (156) (1) 2 2

total loans and advances 475 273 450 301 62 328 55 315 157 703 146 035 238 099 230 000 187 334 179 885 50 765 50 115 16 869 19 089 (6) 121 280 (259)

Comprises: Loans and advances to clients 469 021 448 155 49 801 48 529 156 461 146 723 246 932 238 027 194 915 186 694 52 017 51 333 15 549 15 013 124 278 (261) Loans and advances to banks 17 478 11 944 13 450 7 170 2 611 512 (5) 33 (9) 31 4 2 1 427 4 232 (5) (3)

loans and advances before impairments 486 499 460 099 63 251 55 699 159 072 147 235 246 927 238 060 194 906 186 725 52 021 51 335 16 976 19 245 (5) 121 278 (261)

* Represents mainly loans relating to Specialised Finance and Debt Capital Markets in Nedbank Capital and other loans in Nedbank Corporate and

Nedbank Retail

** Comparative results have been restated for the prior year’s disclosure within Imperial Bank Limited. Mortgage loans as migrated to the property

asset finance book have been reclassified from homeloans to commercial mortgages, and mortgage loans as migrated to Nedbank Retail

have been reclassified from commercial to homeloans, in line with the group’s reporting. The net result of the reclassification is a R4,2 billion

adjustment from homeloans to commercial mortgages.


NOTES TO THE CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON continued AT 31 DECEMBER

9 InvesTMenT seCurITIesRm 2010 2009

listed investments 536 485

Private-equity portfolio 532 482 Other 4 3

unlisted investments 2 475 2 491

Endowment policies 18 18 N.E.S. Investment (Pty) Limited 354 185 Morning Tide Investments 168 (Pty) Limited 105 91 Strate Limited 36 31 Private-equity portfolio 1 127 1 274 Other 835 892

Total listed and unlisted investments 3 011 2 976

Listed policyholder investments at market value 7 068 6 417

Equities 275 350 Government, public and private sector stock 117 396 unit trusts 6 676 5 671

unlisted policyholder investments at directors’ valuation 1 871 1 666

Equities 1 1 Negotiable certificates of deposit, money market and other short-term funds 1 870 1 665

Net policyholder liabilities (32) (34)

Total policyholder investments 8 907 8 049

Total investment securities 11 918 11 025

summary of total private equity investments and loansinvestment securities 1 659 1 756

property investments 614 563

Listed investments 508 462 unlisted investments 106 101

other investments 1 045 1 193

Listed investments 24 20 unlisted investments 1 021 1 173

investment in associatesunlisted property investments 908 897

private equity shareholder loans and mezzanine debt facilities 1 945 2 312

total private equity investments and loans 4 512 4 965

51b

NOTES



10 InvesTMenTs In assoCIaTe CoMpanIes and joInT venTures

percentage holding Acquisition

Date towhichequity

incomeaccoun-

Equity-accounted earnings Carrying amount

Market value/ Directors’ valuation

Net indebtedness of loans to/(from) associates

Name of company and nature of business 2010 2009 date year-end ted for 2010 2009 2010 2009 2010 2009 2010 2009

unlistedJoint ventures 56

BoE (Pty) Limited + 50 Jan 03 Dec May 09 30 Nedgroup Life Assurance Company Limited + 50 Jan 03 Dec May 09 26

associates 1 (1) 936 924 936 924 675 608

African Spirit Trading 306 (Pty) Limited ** 33 Oct 06 Dec 40 40 38 Ballywood Properties 1 (Pty) Limited 49 49 Nov 05 Feb 14 11 14 11 1 Bond Choice (Pty) Limited ++ 29 29 Jun 02 Feb Dec 10 (2) 25 25 25 25 Capricorn Business and Technology Park (Pty) Limited 41 41 Nov 98 Sep 11 14 11 14 9 11 Century City JV 50 Dec 10 Dec 55 55 Clidet No 683 (Pty) Limited 49 49 Aug 06 Feb 303 274 303 274 166 166 Consep Developments (Pty) Limited 31 25 Dec 07 Feb 16 22 16 22 16 16 Emergent Investments (Pty) Limited 49 49 Jul 07 Feb 79 75 79 75 66 66 Erf 7 Sandown (Pty) Limited 35 35 Oct 06 Feb 25 20 25 20 5 5 Falcon Forest Trading 85 (Pty) Limited 30 30 Mar 05 Feb 23 15 23 15 * 2 Firefly Investments 74 (Pty) Limited 35 35 Oct 06 Feb 16 19 16 19 7 5 Friedshelf 113 (Pty) Limited 20 20 Aug 02 Feb 14 13 14 13 Hazeldean Retreat (Pty) Limited 20 20 Mar 07 Feb 12 11 12 11 9 12 Masingita Property Investment Holdings (Pty) Limited 35 35 Aug 05 Feb 40 30 40 30 12 12 Mooirivier Mall (Pty) Limited 30 30 Nov 06 Feb 13 6 13 6 83 38 Nedglen Property Developments (Pty) Limited 35 35 Nov 04 Jun 13 11 13 11 Newmarket Property Developments JV 40 40 Aug 06 Dec 10 23 10 23 14 24 Odyssey Developments (Pty) Limited 49 49 Nov 07 Jun 105 114 105 114 34 32 Oukraal Developments (Pty) Limited 30 30 Jan 08 Jun 27 29 27 29 15 15 SafDev Tanganani (Pty) Limited 25 25 Oct 08 Jun 13 13 13 13 TBA Genomineerdes (Pty) Limited 30 30 Jan 03 Jun 8 9 8 9 3 3 The Waterbuck Trust 40 40 Oct 07 Feb 15 15 15 15 18 18 Visigro Investments (Pty) Limited 30 30 Jun 06 Feb 83 108 83 108 (20) (19)Whirlprops 33 (Pty) Limited ++ 49 49 Sep 06 Feb Dec 10 * * * * XDV Investments (Pty) Limited 25 25 Nov 06 Jun * 20 * 20 (20)Other ++ Dec 10 1 1 16 7 16 7 237 184

1 55 936 924 936 924 675 608

These associate companies are all property related companies. There are regulatory constraints, apart from the provisions of the

Companies Act, 1973, that restricts the distribution of funds to the shareholders. Distribution of funds may however be restricted by

loan agreements that the entities have entered into.

* Represents amounts less than R1 million.

** Disposed of during 2010.

+ These joint ventures have been consolidated as subsidiaries from 5 June 2009.

++ These associates are equity accounted.

53b

10 InvesTMenTs In assoCIaTe CoMpanIes and joInT venTures

percentage holding Acquisition

Date towhichequity

incomeaccoun-

Equity-accounted earnings Carrying amount

Market value/ Directors’ valuation

Net indebtedness of loans to/(from) associates

Name of company and nature of business 2010 2009 date year-end ted for 2010 2009 2010 2009 2010 2009 2010 2009

unlistedJoint ventures 56

BoE (Pty) Limited + 50 Jan 03 Dec May 09 30 Nedgroup Life Assurance Company Limited + 50 Jan 03 Dec May 09 26

associates 1 (1) 936 924 936 924 675 608

African Spirit Trading 306 (Pty) Limited ** 33 Oct 06 Dec 40 40 38 Ballywood Properties 1 (Pty) Limited 49 49 Nov 05 Feb 14 11 14 11 1 Bond Choice (Pty) Limited ++ 29 29 Jun 02 Feb Dec 10 (2) 25 25 25 25 Capricorn Business and Technology Park (Pty) Limited 41 41 Nov 98 Sep 11 14 11 14 9 11 Century City JV 50 Dec 10 Dec 55 55 Clidet No 683 (Pty) Limited 49 49 Aug 06 Feb 303 274 303 274 166 166 Consep Developments (Pty) Limited 31 25 Dec 07 Feb 16 22 16 22 16 16 Emergent Investments (Pty) Limited 49 49 Jul 07 Feb 79 75 79 75 66 66 Erf 7 Sandown (Pty) Limited 35 35 Oct 06 Feb 25 20 25 20 5 5 Falcon Forest Trading 85 (Pty) Limited 30 30 Mar 05 Feb 23 15 23 15 * 2 Firefly Investments 74 (Pty) Limited 35 35 Oct 06 Feb 16 19 16 19 7 5 Friedshelf 113 (Pty) Limited 20 20 Aug 02 Feb 14 13 14 13 Hazeldean Retreat (Pty) Limited 20 20 Mar 07 Feb 12 11 12 11 9 12 Masingita Property Investment Holdings (Pty) Limited 35 35 Aug 05 Feb 40 30 40 30 12 12 Mooirivier Mall (Pty) Limited 30 30 Nov 06 Feb 13 6 13 6 83 38 Nedglen Property Developments (Pty) Limited 35 35 Nov 04 Jun 13 11 13 11 Newmarket Property Developments JV 40 40 Aug 06 Dec 10 23 10 23 14 24 Odyssey Developments (Pty) Limited 49 49 Nov 07 Jun 105 114 105 114 34 32 Oukraal Developments (Pty) Limited 30 30 Jan 08 Jun 27 29 27 29 15 15 SafDev Tanganani (Pty) Limited 25 25 Oct 08 Jun 13 13 13 13 TBA Genomineerdes (Pty) Limited 30 30 Jan 03 Jun 8 9 8 9 3 3 The Waterbuck Trust 40 40 Oct 07 Feb 15 15 15 15 18 18 Visigro Investments (Pty) Limited 30 30 Jun 06 Feb 83 108 83 108 (20) (19)Whirlprops 33 (Pty) Limited ++ 49 49 Sep 06 Feb Dec 10 * * * * XDV Investments (Pty) Limited 25 25 Nov 06 Jun * 20 * 20 (20)Other ++ Dec 10 1 1 16 7 16 7 237 184

1 55 936 924 936 924 675 608

These associate companies are all property related companies. There are regulatory constraints, apart from the provisions of the

Companies Act, 1973, that restricts the distribution of funds to the shareholders. Distribution of funds may however be restricted by

loan agreements that the entities have entered into.

* Represents amounts less than R1 million.

** Disposed of during 2010.

+ These joint ventures have been consolidated as subsidiaries from 5 June 2009.

++ These associates are equity accounted.



11 InTangIble asseTsRm Note 2010 2009

Computer software and capitalised development costs 11.1 1 998 1 819 goodwill 11.2 4 945 4 981 other intangible assets 11.3 551 615

7 494 7 415

11.1 Computer software and capitalised development costs – carrying amountAmortisation

Rm periods 2010 2009

Computer software 2 – 5 years 1 154 1 068

Customer product systems 645 579 Infrastructure and supporting systems 295 288 Risk management systems 189 201 Channel systems 25

Capitalised development costs none * 844 751

Customer product systems 318 297 Infrastructure and supporting systems 433 370 Risk management systems 85 84 Channel systems 8

1 998 1 819

Computer softwareOpening balance 1 068 933 Additions 154 153 Commissioned during year 423 439 Disposals and retirements 4Foreign exchange and other movements 5 (1)Amortisation charge for the year (496) (459)Impairments (1)

Closing balance 1 154 1 068

Capitalised development costsOpening balance 751 674 Additions 570 526 Commissioned during year (423) (439)Impairments (54) (10)

Closing balance 844 751

* Assets not yet commisioned and only begin amortisation once transferred to computer software. These assets are impaired if the value is adjusted.

11.2 goodwill – carrying amountRm 2010 2009

Carrying amount at beginning of year 4 981 3 894 Arising on business combinations 1 126Foreign currency translation (36) (39)

Carrying amount at end of year 4 945 4 981

55b

11 InTangIble asseTs (ConTInued)11.2 goodwill – carrying amount

2010 2009

RmPercentage

holding Cost

Accumu-lated

impair-ment

lossesCarryingamount Cost

Accumu-lated

impair-ment losses

Carryingamount

Fairbairn Private Bank (Jersey)

Limited/Fairbairn Trust

Company Limited (Guernsey)* 100 372 (138) 234 408 (138) 270 Peoples Mortgage Limited 100 198 (198) – 198 (198) –Imperial Bank Limited 100 285 (25) 260 285 (25) 260 Nedbank Limited 100 3 938 (1 114) 2 824 3 938 (1 114) 2 824 Old Mutual Bank 100 206 206 206 206 BoE (Pty) Limited 100 725 725 725 725 Nedgroup Life Assurance

Company Limited 100 401 401 401 401 Nedbank Namibia Limited 100 134 (2) 132 134 (2) 132 Capital One 82 82 82 82 American Express 81 81 81 81

6 422 (1 477) 4 945 6 458 (1 477) 4 981

* Movement in cost due to foreign currency translation

11.3 other intangible assets – carrying amount2010 2009

Rm

Amortis-ation

period Cost

Accumu-lated

amorti-sation and

impair-ments

Carryingamount Cost

Accumu-lated

amorti-sation and

impair-ments

Carryingamount

Major subsidiariesBoE (Pty) Limited 8 – 15 years 458 71 387 458 27 431 Nedgroup Life Assurance Company Limited 10 years 195 31 164 195 11 184

653 102 551 653 38 615

11.4 intangible assets – ratio’sRm 2010 2009

Total assets 608 718 570 703 Ordinary shareholders’ equity 44 101 39 649 Intangible assets 7 494 7 415

Capitalised software (Refer note 11.1) 1 998 1 819 Goodwill (Refer note 11.2) 4 945 4 981 Other intangible assets (Refer note 11.3) 551 615

Intangible assets/Total assets (%) 1,23 1,30 Intangible assets/Ordinary shareholders’ equity (%) 17,0 18,7


13 aMounTs owed To deposITorssegmental breakdown


Business Banking Nedbank Retail Business Banking Nedbank Wealth Shared Services


Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Current accounts 47 672 44 539 161 380 6 383 4 309 40 395 39 086 25 223 24 657 15 172 14 429 674 665 1 16 58 83 Savings accounts 14 756 15 294 549 507 8 431 8 405 8 249 8 209 182 196 5 758 6 348 18 34 Other deposits and loan accounts 293 467 283 829 58 070 56 120 118 827 110 506 111 692 111 927 53 502 53 550 58 190 58 377 4 924 6 087 6 (1) (52) (810)

Call and term deposits 166 386 178 424 3 579 10 975 77 093 81 485 81 307 80 449 30 080 28 596 51 227 51 853 4 294 5 474 113 41 Fixed deposits 27 078 27 941 2 689 3 485 1 568 1 296 22 765 23 117 22 081 22 455 684 662 59 49 (3) (6)Cash management deposits 46 151 33 037 239 50 39 557 27 021 5 784 5 410 18 17 5 766 5 393 571 563 (7)Other deposits 53 852 44 427 51 563 41 610 609 704 1 836 2 951 1 323 2 482 513 469 1 6 6 (162) (845)

Foreign client liabilities 9 781 7 027 3 343 1 628 3 983 3 155 2 455 2 244 230 225 2 225 2 019 Negotiable certificates of deposit 110 584 103 731 108 810 102 339 1 452 1 354 322 38 Deposits received under repurchase agreements 14 180 14 935 13 817 14 574 363 325 36

total amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619)


12 ordInary share CapITal and preMIuM2010 2009

PriceR

Number ofshares

m

Total

Rm

Ordinaryshare

capitalRm

Ordinaryshare

premiumRm

Number ofshares

m

Total

Rm

Ordinaryshare

capitalRm

Ordinaryshare

premiumRm

Total shares listed 514,9 19 638 515 19 123 498,8 17 419 499 16 920 Less: Treasury shares held 66,3 3 667 66 3 601 63,1 3 255 63 3 192

Executed H2 2005 97,2 1,0 100 1 99 1,0 100 1 99 Executed H1 2006 111,7 5,5 616 6 610 5,5 616 6 610 Executed H2 2006 109,2 8,2 897 8 889 8,2 897 8 889

Bought back – capital management 109,04 14,7 1 613 15 1 598 14,7 1 613 15 1 598

BEE transaction shares 40,3 938 40 898 40,5 938 40 898 Other shares held by group entities 11,3 1 116 11 1 105 7,9 704 8 696

Net shares reported 448,6 15 971 449 15 522 435,7 14 164 436 13 728

57b

13 aMounTs owed To deposITorssegmental breakdown


Business Banking Nedbank Retail Business Banking Nedbank Wealth Shared Services


Eliminations

Rm 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009

Current accounts 47 672 44 539 161 380 6 383 4 309 40 395 39 086 25 223 24 657 15 172 14 429 674 665 1 16 58 83 Savings accounts 14 756 15 294 549 507 8 431 8 405 8 249 8 209 182 196 5 758 6 348 18 34 Other deposits and loan accounts 293 467 283 829 58 070 56 120 118 827 110 506 111 692 111 927 53 502 53 550 58 190 58 377 4 924 6 087 6 (1) (52) (810)

Call and term deposits 166 386 178 424 3 579 10 975 77 093 81 485 81 307 80 449 30 080 28 596 51 227 51 853 4 294 5 474 113 41 Fixed deposits 27 078 27 941 2 689 3 485 1 568 1 296 22 765 23 117 22 081 22 455 684 662 59 49 (3) (6)Cash management deposits 46 151 33 037 239 50 39 557 27 021 5 784 5 410 18 17 5 766 5 393 571 563 (7)Other deposits 53 852 44 427 51 563 41 610 609 704 1 836 2 951 1 323 2 482 513 469 1 6 6 (162) (845)

Foreign client liabilities 9 781 7 027 3 343 1 628 3 983 3 155 2 455 2 244 230 225 2 225 2 019 Negotiable certificates of deposit 110 584 103 731 108 810 102 339 1 452 1 354 322 38 Deposits received under repurchase agreements 14 180 14 935 13 817 14 574 363 325 36

total amounts owed to depositors 490 440 469 355 184 201 175 041 131 194 119 831 162 973 161 662 87 204 86 641 75 769 75 021 11 356 13 100 370 340 346 (619)

NOTES



14 long-TerM debT InsTruMenTsNominal

value Instrument terms 2010 2009

Subordinated debt 10 937 11 126

Rand-denominated (Rm) 10 269 10 385

Callable bonds repayable on 30 December 2010 (IPB2) (a) + 500 8,38% per annum* 493 Callable bonds repayable on 4 December 2013 (IPB3) (b) 300 JIBAR + 2,5% per annum** 151 151 Callable notes repayable

1 500 7,85% per annum* 1 525 1 499 Callable notes repayable on 20 September 2018 (NED06) (d) 1 800 9,84% per annum* 1 915 1 781 Callable notes repayable on 8 February 2017 (NED07) (c) 650 9,03% per annum* 682 658 Callable notes repayable on 8 February 2019 (NED08) (d) 1 700 8,90% per annum* 1 759 1 643 Callable notes repayable on 6 July 2022 (NED09) (f) 2 000 JIBAR + 0,47% per annum** 2 031 2 036 Callable notes repayable on 15 August 2017 (NED10) (c) 500 JIBAR + 0,45% per annum** 504 505 Callable notes repayable on 17 September 2020 (NED11) (e) 1 000 10,54% per annum* 1 076 997 Callable notes repayable on 14 December 2017 (NED12A) (c) 500 JIBAR + 0,70% per annum** 502 502 Callable notes repayable on 14 December 2017 (NED12B) (c) 120 10,38% per annum* 124 120

Namibian dollar-denominated (NAM$m) 2 2

Long-term debenture repayable on 15 September 2030 40

17% per annum until 15 September 2000 – thereafter zero coupon 2 2

US dollar-denominated (US$m)Callable notes repayable on 3 March 2022 (EMTN01) (i) 100 3-month uS$ LIBOR** 666 739

Hybrid subordinated debt 1 808 1 766

Rand-denominated (Rm)Callable notes repayable on 20 November 2018 (NEDH1A) (g) 487 15,05% per annum* 529 484 Callable notes repayable on 20 November 2018 (NEDH1B) (g) 1 265 JIBAR + 4,75% per annum** 1 279 1 282

Securitised liabilities 1 154 1 412

Rand-denominated (Rm)Callable notes repayable on 18 November 2039 (GRN1A1) (h) 291 JIBAR + 0,25% per annum** 38 294 Callable notes repayable on 18 November 2039 (GR1A2A) (h) 1 407 JIBAR + 0,60% per annum** 991 993 Callable notes repayable on 18 November 2039 (GRN1B) (h) 98 JIBAR + 0,85% per annum** 74 75 Callable notes repayable on 18 November 2039 (GRN1C) (h) 76 JIBAR + 1,1% per annum** 51 50

59b

14 long-TerM debT InsTruMenTs (ConTInued)Nominal

value Instrument terms 2010 2009

Senior unsecured debtRand-denominated (ZARm) 12 197 5 773

Senior unsecured notes repayable on 9 September 2012 (NBK1B) 1 690 JIBAR + 1,50% per annum** 1 697 1 005Senior unsecured notes repayable on 15 September 2015 (NBK2A) 3 244 10,55% per annum* 3 347 2 065Senior unsecured notes repayable on 15 September 2015 (NBK2B) 1 044 JIBAR + 2,20% per annum** 1 054 251Senior unsecured notes repayable on 9 September 2019 (NBK3A) 762 11,39% per annum* 788 414Senior unsecured notes repayable on 31 March 2013 (NBKI1) 1 750 3,9% real yield base CPI ref 106.70667* 1 859 1 805Senior unsecured notes repayable on 28 October 2024 (NBK4) 130 Zero coupon 164 136Senior unsecured notes repayable on 31 March 2013 (NBKI1u) 98 3,8% real yield base CPI ref 108.68065* 102 97Senior unsecured notes repayable on 19 April 2013 (NBK5B) 1 552 JIBAR + 1,48% per annum** 1 575 Senior unsecured notes repayable on 19 April 2015 (NBK6A) 478 R157 + 1,75% per annum* 487 Senior unsecured notes repayable on 19 April 2015 (NBK6B) 1 027 JIBAR + 1,75% per annum** 1 043 Senior unsecured notes repayable on 19 April 2020 (NBK7B) 80 JIBAR + 2,15% per annum** 81

other 8 7

Rand-denominated (Rm) 8 7

unsecured debentures repayable on

30 November 2029 200 Zero coupon 8 7

total long-term debt instruments in

issue 26 104 20 084

During the year there were no defaults or breaches of principal, interest or any other terms and conditions of long-term debt instruments.Coupon holders are entitled, in the event of interest default, to put the coupon covering such interest payments to Nedbank Group Limited. The uS dollar subordinated-debt instruments are either matched by advances to clients or covered against exchange rate fluctuations. In accordance with the group’s articles of association, the borrowing powers of the company are unlimited.* Interest on these notes is payable biannually.** Interest on these notes is payable quarterly.+ The debt instrument was redeemed on its call date 30 December 2010.

(a) Callable by Nedbank Limited (previously by Imperial Bank Limited), after approximately five years from the date of issue, 30 March 2006 (i.e. 30 December 2010), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,67%.

(b) Callable by Nedbank Limited (previously by Imperial Bank Limited), after five years from the date of issue, 4 December 2008 (i.e. 4 December 2013), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 3,75%.

(c) Callable by the issuer, Nedbank Limited, after five years from the date of issue, 24 April 2006, 8 February 2007, 15 August 2007, 14 December 2007 and 14 December 2007 (i.e. 24 April 2011, 8 February 2012, 15 August 2012, 14 December 2012 and 14 December 2012), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 1,70%, 1,95%, 1,45%, 1,70% and 1,70%, respectively.

(d) Callable by the issuer, Nedbank Limited, after seven years from the date of issue, being 20 September 2006 and 8 February 2007 (i.e. 20 September 2013 and 8 February 2014), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,05% and 2,17%, respectively.

(e) Callable by the issuer, Nedbank Limited, after eight years from the date of issue, being 17 September 2007 (i.e. 17 September 2015), at which time the interest converts to a floating 3-month JIBAR rate, plus a spread of 2,85%.

(f) Callable by the issuer, Nedbank Limited, after ten years from the date of issue, being 6 July 2007 (i.e. 6 July 2017), at which time the interest will step up by 1,00% to a floating 3-month JIBAR rate, plus a spread of 1,47%.

(g) Callable by the issuer, Nedbank Limited, after ten and a half years from the date of issue, being 20 May 2008 (i.e. 20 Nov 2018), at which the interest converts to a floating 3-month JIBAR rate plus 712,5bps in perpetuity unless called.

(h) Callable by the issuer, Greenhouse Funding (Pty) Limited, after approximately five years from the date of issue, being 10 December 2007 (i.e. 18 November 2012), at which time the interest rate on the notes (GRN1A1,GR1A2A, GRN1B, GRN1C)will step up to three-month JIBAR rate, plus a spread of 0,40%, 0,80%, 1,10% and 1,35%, respectively.

(i) Callable by the issuer, Nedbank Limited, after eight years from the date of issue 3 March 2009 (i.e. 3 March 2017), at which time the interest rate coverts to a floating 3-month uS$ LIBOR rate, plus a spread of 3,00%.



15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 ChargeThese are purely illustrative scenarios for the period 2011 – 2017 of the dilutive potential ordinary shares and the IFRS 2 charge

as at the end of each year. The first scenario is at an illustrative annual share price growth of 10% and dilutive sensitivity.

15.1 estimated future dilutive shares as at end of each year (‘000)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Actual Actual Actual Actual Actual Actual Illustrative

forecast Illustrative






forecast

Dilutive shares at 10% share price growth:sa Bee transaction 1 408 8 144 9 812 2 094 4 381 5 084 2 103 2 225 1 733 1 691 1 348 608 353

Black Business Partners (BBP) 764 2 992 2 631 1 024 775 509 674 Non-executive directors (NED) 21 116 225 81 171 142 Retail 12 685 2 051 1 065 1 Corporate 581 3 164 3 243 1 976 2 269 Black Executives 11 209 377 226 286 374 256 273 320 327 291 209 137 Black Management 19 978 1 285 722 923 1 524 1 339 1 278 1 413 1 364 1 057 400 216

namibia Bee transaction 10 6 19 42 56 45 48 44 46

Black Business Partners (BBP) 20 22 24 26 29 Affinity Groups (AG) 18 17 16 15 14 Education Discretionary LTIP 9 13 13 Black Management 10 6 10 29 5 7 8 3 4

1 408 8 144 9 822 2 100 4 400 5 126 2 159 2 271 1 781 1 735 1 394 608 353

Dilutive shares at share price growth of:sa Bee transaction5% 1 408 8 144 9 812 2 094 4 381 5 084 1 785 1 348 1 375 1 302 1 003 271 149 15% 1 408 8 144 9 812 2 094 4 381 5 084 2 648 3 020 2 194 1 824 1 321 421 171 20% 1 408 8 144 9 812 2 094 4 381 5 084 3 090 3 907 3 061 2 120 1 454 485 181 30% 1 408 8 144 9 812 2 094 4 381 5 084 3 933 5 399 4 521 3 513 1 679 593 198

namibia Bee transaction5% 10 6 19 42 104 111 40 41 42 15% 10 6 19 42 114 123 44 45 47 20% 10 6 19 42 115 124 45 46 48 30% 10 6 19 42 116 125 46 47 49

61b

15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 ChargeThese are purely illustrative scenarios for the period 2011 – 2017 of the dilutive potential ordinary shares and the IFRS 2 charge

as at the end of each year. The first scenario is at an illustrative annual share price growth of 10% and dilutive sensitivity.

15.1 estimated future dilutive shares as at end of each year (‘000)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Actual Actual Actual Actual Actual Actual Illustrative







forecast

Dilutive shares at 10% share price growth:sa Bee transaction 1 408 8 144 9 812 2 094 4 381 5 084 2 103 2 225 1 733 1 691 1 348 608 353

Black Business Partners (BBP) 764 2 992 2 631 1 024 775 509 674 Non-executive directors (NED) 21 116 225 81 171 142 Retail 12 685 2 051 1 065 1 Corporate 581 3 164 3 243 1 976 2 269 Black Executives 11 209 377 226 286 374 256 273 320 327 291 209 137 Black Management 19 978 1 285 722 923 1 524 1 339 1 278 1 413 1 364 1 057 400 216

namibia Bee transaction 10 6 19 42 56 45 48 44 46

Black Business Partners (BBP) 20 22 24 26 29 Affinity Groups (AG) 18 17 16 15 14 Education Discretionary LTIP 9 13 13 Black Management 10 6 10 29 5 7 8 3 4

1 408 8 144 9 822 2 100 4 400 5 126 2 159 2 271 1 781 1 735 1 394 608 353

Dilutive shares at share price growth of:sa Bee transaction5% 1 408 8 144 9 812 2 094 4 381 5 084 1 785 1 348 1 375 1 302 1 003 271 149 15% 1 408 8 144 9 812 2 094 4 381 5 084 2 648 3 020 2 194 1 824 1 321 421 171 20% 1 408 8 144 9 812 2 094 4 381 5 084 3 090 3 907 3 061 2 120 1 454 485 181 30% 1 408 8 144 9 812 2 094 4 381 5 084 3 933 5 399 4 521 3 513 1 679 593 198

namibia Bee transaction5% 10 6 19 42 104 111 40 41 42 15% 10 6 19 42 114 123 44 45 47 20% 10 6 19 42 115 124 45 46 48 30% 10 6 19 42 116 125 46 47 49



15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)15.2 estimated share-based payment iFrs 2 Bee charge per year (rm)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

iFrs 2 Bee charge at 10% share price growth:sa Bee transaction 371,2 116,5 146,5 180,0 109,0 140,0 76,4 71,8 77,3 73,3 66,3 58,6 54,1 1 541,0

Black Business Partners (BBP) 214,6 19,0 9,0 10,0 10,0 23,0 24,0 26,4 29,0 31,9 35,1 38,7 470,8 Non-executive directors (NED) 0,6 2,0 12,0 5,0 2,0 21,6 Retail 1,1 38,0 30,2 73,0 6,0 148,3 Corporate 14,3 50,7 56,3 60,0 53,0 101,0 9,7 345,0 Black Executives 2,4 6,7 7,0 9,0 6,0 7,0 11,3 14,3 17,2 16,1 13,3 9,4 6,3 126,0 Black Management 10,6 19,1 22,0 24,0 32,0 22,0 32,4 33,5 33,7 28,2 21,0 14,0 9,1 301,7 Broad-based 127,6 127,6

namibia Bee transaction – 21,7 – 0,9 1,0 2,9 5,1 2,4 1,6 1,2 0,9 0,5 0,2 35,5

Black Business Partners (BBP) 9,0 9,0 Affinity Groups (AG) 3,3 3,3 Education 4,4 4,4 Discretionary 2,2 1,9 1,5 1,2 0,9 0,5 0,2 8,3 LTIP 0,1 0,4 2,7 0,4 3,2 Black Management 0,9 0,9 2,5 0,2 0,1 0,1 2,2 Broad-based 5,0 5,0

371,2 138,2 146,5 180,9 110,0 142,9 81,5 74,2 78,9 74,6 67,2 59,1 54,3 1 576,5

15.2 total estimated iFrs 2 Bee charge (rm)

at varying share price growth assumptions

December 2010 December 2009 5% 10% 15% 20% 30% 5% 10% 15% 20% 30%

sa Bee transaction 989,8 1 541,0 1 618,1 1 699,0 1 868,9 1 148,6 1 490,7 1 565,2 1 643,6 1 807,8

Pegged cost for instruments allocated to date 912,9 912,9 958,5 1 006,4 1 107,1 1 021,3 1 021,3 1 072,3 1 126,0 1 238,5 Future costs dependant on share price growth 76,9 628,1 659,6 692,5 761,8 127,3 469,4 492,9 517,6 569,3

namibia Bee transaction 35,6 35,5 35,3 35,1 34,8 34,5 34,8 35,1 35,5 36,1

Pegged cost for instruments allocated to date 38,8 38,8 38,8 38,8 38,8 28,8 28,8 28,8 28,8 28,8 Future costs dependant on share price growth (3,2) (3,3) (3,5) (3,7) (4,0) 5,7 6,0 6,3 6,7 7,3

1 025,4 1 576,5 1 653,4 1 734,1 1 903,6 1 183,1 1 525,5 1 600,3 1 679,1 1 843,9

63b

15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)15.2 estimated share-based payment iFrs 2 Bee charge per year (rm)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total

iFrs 2 Bee charge at 10% share price growth:sa Bee transaction 371,2 116,5 146,5 180,0 109,0 140,0 76,4 71,8 77,3 73,3 66,3 58,6 54,1 1 541,0

Black Business Partners (BBP) 214,6 19,0 9,0 10,0 10,0 23,0 24,0 26,4 29,0 31,9 35,1 38,7 470,8 Non-executive directors (NED) 0,6 2,0 12,0 5,0 2,0 21,6 Retail 1,1 38,0 30,2 73,0 6,0 148,3 Corporate 14,3 50,7 56,3 60,0 53,0 101,0 9,7 345,0 Black Executives 2,4 6,7 7,0 9,0 6,0 7,0 11,3 14,3 17,2 16,1 13,3 9,4 6,3 126,0 Black Management 10,6 19,1 22,0 24,0 32,0 22,0 32,4 33,5 33,7 28,2 21,0 14,0 9,1 301,7 Broad-based 127,6 127,6

namibia Bee transaction – 21,7 – 0,9 1,0 2,9 5,1 2,4 1,6 1,2 0,9 0,5 0,2 35,5

Black Business Partners (BBP) 9,0 9,0 Affinity Groups (AG) 3,3 3,3 Education 4,4 4,4 Discretionary 2,2 1,9 1,5 1,2 0,9 0,5 0,2 8,3 LTIP 0,1 0,4 2,7 0,4 3,2 Black Management 0,9 0,9 2,5 0,2 0,1 0,1 2,2 Broad-based 5,0 5,0

371,2 138,2 146,5 180,9 110,0 142,9 81,5 74,2 78,9 74,6 67,2 59,1 54,3 1 576,5

15.2 total estimated iFrs 2 Bee charge (rm)

at varying share price growth assumptions

December 2010 December 2009 5% 10% 15% 20% 30% 5% 10% 15% 20% 30%

sa Bee transaction 989,8 1 541,0 1 618,1 1 699,0 1 868,9 1 148,6 1 490,7 1 565,2 1 643,6 1 807,8

Pegged cost for instruments allocated to date 912,9 912,9 958,5 1 006,4 1 107,1 1 021,3 1 021,3 1 072,3 1 126,0 1 238,5 Future costs dependant on share price growth 76,9 628,1 659,6 692,5 761,8 127,3 469,4 492,9 517,6 569,3

namibia Bee transaction 35,6 35,5 35,3 35,1 34,8 34,5 34,8 35,1 35,5 36,1

Pegged cost for instruments allocated to date 38,8 38,8 38,8 38,8 38,8 28,8 28,8 28,8 28,8 28,8 Future costs dependant on share price growth (3,2) (3,3) (3,5) (3,7) (4,0) 5,7 6,0 6,3 6,7 7,3

1 025,4 1 576,5 1 653,4 1 734,1 1 903,6 1 183,1 1 525,5 1 600,3 1 679,1 1 843,9


NEDBANK GROuP SHARE-BASED pAYMENTS ANALySIS OF BEE SCHEMES – ILLuSTRATIVE ROLL OF SHARES – BASED ON A 10% INCREASE IN SHARE PRICE

15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)

Inception Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009

Actual

2010

Illustrativeforecast

2011


2012


2013


2014


2015


2016


2017


2018


2019 Total Illustrativecap shares

Illustrativecap shares


15.4 illustrative vesting outside of groupOpening balance 1 471 700 1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 sa Bee transaction 47 977 154 124 2 030 433 5 468 854 883 310 13 666 809 852 675 1 190 929 1 303 995 9 019 296 974 562 582 856 235 437 930 278 38 813 237 9 070 662 (13 249 486) 34 634 414

BBP 7 891 300 7 891 300 5 378 003 (5 947 106) 7 322 197 NED 789 130 789 130 198 147 (424 666) 562 611 Retail – For sale 19 965 65 280 2 024 091 3 192 834 5 302 170 5 302 170 Retail – Free shares 1 767 390 1 767 390 1 767 390 Corporate Non-Aka 10 160 049 10 160 049 2 878 148 (5 714 284) 7 323 913 Corporate Aka 1 676 901 1 676 901 616 364 (1 163 429) 1 129 836 Community Black executives 105 480 247 138 150 068 111 091 110 738 145 362 199 956 311 949 237 248 101 101 373 394 2 093 521 2 093 521 Black management 28 012 88 844 6 342 403 150 636 172 890 662 741 585 1 080 192 1 158 634 928 041 662 614 345 609 134 337 556 885 7 661 076 7 661 076 Broad-based 1 471 700 1 471 700 Evergreen

namibia Bee transaction 39 816 19 810 17 182 35 690 70 708 12 510 7 784 380 491 81 452 665 443 327 452 (413 133) 579 762

BBP 199 929 199 929 119 714 (173 659) 145 984 AG 74 048 74 048 29 498 (44 259) 59 287 Education 98 730 98 730 39 331 (59 011) 79 049 Discretionary 81 452 81 452 138 909 (136 203) 84 157 LTIP 6 600 13 368 61 782 81 750 81 750 Black Management 13 210 17 182 22 322 8 926 12 510 7 784 7 784 89 718 89 718 Broad-based 39 816 39 816 39 816

1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 39 478 680 39 478 680 9 398 114 (13 662 618) 35 214 176

treasury shares, i.e. in trusts considered to be inside group

opening balance 39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 inception** 41 268 130 665 443

sa Bee transaction 41 268 130 (1 471 700) (47 977) (154 124) (2 030 433) (5 468 854) (883 310) (13 666 809) (852 675) (1 190 929) (1 303 995) (9 019 296) (974 562) (582 856) (235 437) (930 278) 2 454 893

BBP 7 891 300 (7 891 300) NED 789 130 (789 130) Retail For sale 5 302 170 (19 965) (65 280) (2 024 091) (3 192 834) Retail – Free shares 1 767 390 (1 767 390) Corporate Non-Aka 10 160 049 (10 160 049) Corporate Aka 1 676 901 (1 676 901) Community 1 531 551 1 531 551 Black executives 2 093 521 (105 480) (247 138) (150 068) (111 091) (110 738) (145 362) (199 956) (311 949) (237 248) (101 101) (373 394) Black management 7 661 076 (28 012) (88 844) (6 342) (403 150) (636 172) (890 662) (741 585) (1 080 192) (1 158 634) (928 041) (662 614) (345 609) (134 337) (556 885) Broad-based 1 471 700 (1 471 700) Evergreen 923 342 923 342

namibia Bee transaction 665 443 (39 816) (19 810) (17 182) (35 690) (70 708) (12 510) (7 784) (380 491) (81 452)

BBP 199 929 (199 929) AG 74 048 (74 048) Education 98 730 (98 730) Discretionary 81 452 (81 452) LTIP 81 750 (6 600) (13 368) (61 782) Black Management 89 718 (13 210) (17 182) (22 322) (8 926) (12 510) (7 784) (7 784) Broad-based 39 816 (39 816)

39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 2 454 893 2 454 893

Illustrative cap/issued/purchased shares 815 960 2 150 413 3 666 988 5 304 469 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248

39 796 430 41 190 040 42 370 369 41 856 511 38 025 138 37 869 797 24 185 805 23 297 440 22 035 803 20 719 298 11 692 217 10 337 164 9 754 308 9 518 871 8 507 141 2 454 893

** Inception figures have changed due to re-allocation between the Ned scheme and Corporate Non-Aka

65b

15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)

Inception Actual

2005 Actual

2006 Actual

2007 Actual

2008 Actual

2009

Actual

2010


2011


2012


2013


2014


2015


2016


2017


2018


2019 Total Illustrativecap shares



15.4 illustrative vesting outside of groupOpening balance 1 471 700 1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 sa Bee transaction 47 977 154 124 2 030 433 5 468 854 883 310 13 666 809 852 675 1 190 929 1 303 995 9 019 296 974 562 582 856 235 437 930 278 38 813 237 9 070 662 (13 249 486) 34 634 414

BBP 7 891 300 7 891 300 5 378 003 (5 947 106) 7 322 197 NED 789 130 789 130 198 147 (424 666) 562 611 Retail – For sale 19 965 65 280 2 024 091 3 192 834 5 302 170 5 302 170 Retail – Free shares 1 767 390 1 767 390 1 767 390 Corporate Non-Aka 10 160 049 10 160 049 2 878 148 (5 714 284) 7 323 913 Corporate Aka 1 676 901 1 676 901 616 364 (1 163 429) 1 129 836 Community Black executives 105 480 247 138 150 068 111 091 110 738 145 362 199 956 311 949 237 248 101 101 373 394 2 093 521 2 093 521 Black management 28 012 88 844 6 342 403 150 636 172 890 662 741 585 1 080 192 1 158 634 928 041 662 614 345 609 134 337 556 885 7 661 076 7 661 076 Broad-based 1 471 700 1 471 700 Evergreen

namibia Bee transaction 39 816 19 810 17 182 35 690 70 708 12 510 7 784 380 491 81 452 665 443 327 452 (413 133) 579 762

BBP 199 929 199 929 119 714 (173 659) 145 984 AG 74 048 74 048 29 498 (44 259) 59 287 Education 98 730 98 730 39 331 (59 011) 79 049 Discretionary 81 452 81 452 138 909 (136 203) 84 157 LTIP 6 600 13 368 61 782 81 750 81 750 Black Management 13 210 17 182 22 322 8 926 12 510 7 784 7 784 89 718 89 718 Broad-based 39 816 39 816 39 816

1 559 493 1 713 617 3 744 050 9 212 904 10 116 024 23 800 016 24 688 381 25 950 018 27 266 523 36 293 604 37 648 657 38 231 513 38 466 950 39 478 680 39 478 680 9 398 114 (13 662 618) 35 214 176

treasury shares, i.e. in trusts considered to be inside group

opening balance 39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 inception** 41 268 130 665 443

sa Bee transaction 41 268 130 (1 471 700) (47 977) (154 124) (2 030 433) (5 468 854) (883 310) (13 666 809) (852 675) (1 190 929) (1 303 995) (9 019 296) (974 562) (582 856) (235 437) (930 278) 2 454 893

BBP 7 891 300 (7 891 300) NED 789 130 (789 130) Retail For sale 5 302 170 (19 965) (65 280) (2 024 091) (3 192 834) Retail – Free shares 1 767 390 (1 767 390) Corporate Non-Aka 10 160 049 (10 160 049) Corporate Aka 1 676 901 (1 676 901) Community 1 531 551 1 531 551 Black executives 2 093 521 (105 480) (247 138) (150 068) (111 091) (110 738) (145 362) (199 956) (311 949) (237 248) (101 101) (373 394) Black management 7 661 076 (28 012) (88 844) (6 342) (403 150) (636 172) (890 662) (741 585) (1 080 192) (1 158 634) (928 041) (662 614) (345 609) (134 337) (556 885) Broad-based 1 471 700 (1 471 700) Evergreen 923 342 923 342

namibia Bee transaction 665 443 (39 816) (19 810) (17 182) (35 690) (70 708) (12 510) (7 784) (380 491) (81 452)

BBP 199 929 (199 929) AG 74 048 (74 048) Education 98 730 (98 730) Discretionary 81 452 (81 452) LTIP 81 750 (6 600) (13 368) (61 782) Black Management 89 718 (13 210) (17 182) (22 322) (8 926) (12 510) (7 784) (7 784) Broad-based 39 816 (39 816)

39 796 430 40 374 080 40 219 956 38 189 523 32 720 669 31 817 549 18 133 557 17 245 192 15 983 555 14 667 050 5 639 969 4 284 916 3 702 060 3 466 623 2 454 893 2 454 893

Illustrative cap/issued/purchased shares 815 960 2 150 413 3 666 988 5 304 469 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248 6 052 248

39 796 430 41 190 040 42 370 369 41 856 511 38 025 138 37 869 797 24 185 805 23 297 440 22 035 803 20 719 298 11 692 217 10 337 164 9 754 308 9 518 871 8 507 141 2 454 893

** Inception figures have changed due to re-allocation between the Ned scheme and Corporate Non-Aka


NEDBANK GROuP SHARE-BASED pAYMENTScontinued15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued)

Inception 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total

illustrative roll of shares

sa Bee transactionIssued outside group 1 471 700 1 519 677 1 673 801 3 704 234 9 173 088 10 056 398 23 723 208 24 575 883 25 766 812 27 070 807 36 090 104 37 064 666 37 647 522 37 882 959 38 813 237 38 813 237 Treasury shares 41 268 130 39 796 430 39 748 453 39 594 329 37 563 896 32 095 042 31 211 732 17 544 922 16 692 247 15 501 318 14 197 323 5 178 026 4 203 464 3 620 608 3 385 171 2 454 893 2 454 893

original Bee allocation 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 Cap shares 116 659 747 199 1 024 777 1 458 515 1 551 300 860 842 903 026 510 426 561 469 617 616 679 378 9 031 207

BBP 96 214 289 466 442 266 619 756 675 548 421 840 464 024 510 426 561 469 617 616 679 378 5 378 003 NED 28 021 35 439 48 777 51 586 17 162 17 162 198 147 Corporate 20 445 429 712 547 072 789 982 824 166 421 840 421 840 3 455 057

41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 42 171 156 41 778 556 41 829 599 41 885 746 41 947 508 41 268 130 41 268 130 41 268 130 41 268 130 50 299 337 Call option shares (9 949 366) (5 947 106) (15 896 472)

BBP (5 947 106) (5 947 106) NED (621 898) (621 898) Corporate (9 327 468) (9 327 468)

shares expected at end 41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 32 221 790 41 778 556 41 829 599 41 885 746 36 000 401 41 268 130 41 268 130 41 268 130 41 268 130 34 402 865

Weighted dilutive shares 1 406 976 8 143 756 9 811 687 2 093 953 4 381 086 5 084 264 2 103 406 2 225 370 1 733 235 1 691 435 1 348 111 608 499 352 918

illustrative roll of shares namibia Bee transactionIssued outside group 39 816 39 816 39 816 39 816 59 626 76 808 112 498 183 206 195 716 203 500 583 991 583 991 665 443 583 991 665 444 Treasury shares 665 442 625 626 625 626 625 626 625 626 605 816 588 634 552 944 482 236 469 726 461 942 81 451 81 451 1 81 453 30 059

original Bee allocation 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 444 665 444 695 503 Cap/issued/purchased shares 13 937 34 815 35 377 13 291 14 620 16 082 17 690 19 459 21 405 23 546 6 255 6 881 7 569 230 928

BBP 8 928 19 148 20 061 6 102 6 712 7 383 8 122 8 934 9 827 10 810 106 028 AG 2 724 6 296 7 431 3 280 3 608 3 969 4 366 4 802 5 282 5 811 47 569 Education 2 285 3 113 418 699 769 846 930 1 023 1 126 1 238 12 448 Discretionary 6 258 7 467 3 210 3 531 3 884 4 273 4 700 5 170 5 687 6 255 6 881 7 569 64 884

665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 688 988 671 697 672 325 673 013 926 431 Call option shares (325 614) (87 519) (413 133)

BBP (173 659) (173 659) AG (44 259) (44 259) Education (59 011) (59 011) Discretionary (48 684) (87 519) (136 203)

Shares expected at end 665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 363 374 671 697 584 806 673 013 513 299

67b

15 bee: esTIMaTed FuTure dIluTIve shares and IFrs 2 Charge (ConTInued) Inception 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total

illustrative roll of shares

sa Bee transactionIssued outside group 1 471 700 1 519 677 1 673 801 3 704 234 9 173 088 10 056 398 23 723 208 24 575 883 25 766 812 27 070 807 36 090 104 37 064 666 37 647 522 37 882 959 38 813 237 38 813 237 Treasury shares 41 268 130 39 796 430 39 748 453 39 594 329 37 563 896 32 095 042 31 211 732 17 544 922 16 692 247 15 501 318 14 197 323 5 178 026 4 203 464 3 620 608 3 385 171 2 454 893 2 454 893

original Bee allocation 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 41 268 130 Cap shares 116 659 747 199 1 024 777 1 458 515 1 551 300 860 842 903 026 510 426 561 469 617 616 679 378 9 031 207

BBP 96 214 289 466 442 266 619 756 675 548 421 840 464 024 510 426 561 469 617 616 679 378 5 378 003 NED 28 021 35 439 48 777 51 586 17 162 17 162 198 147 Corporate 20 445 429 712 547 072 789 982 824 166 421 840 421 840 3 455 057

41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 42 171 156 41 778 556 41 829 599 41 885 746 41 947 508 41 268 130 41 268 130 41 268 130 41 268 130 50 299 337 Call option shares (9 949 366) (5 947 106) (15 896 472)

BBP (5 947 106) (5 947 106) NED (621 898) (621 898) Corporate (9 327 468) (9 327 468)

shares expected at end 41 268 130 41 384 789 42 015 329 42 292 907 42 726 645 42 819 430 42 128 972 32 221 790 41 778 556 41 829 599 41 885 746 36 000 401 41 268 130 41 268 130 41 268 130 41 268 130 34 402 865

Weighted dilutive shares 1 406 976 8 143 756 9 811 687 2 093 953 4 381 086 5 084 264 2 103 406 2 225 370 1 733 235 1 691 435 1 348 111 608 499 352 918

illustrative roll of shares namibia Bee transactionIssued outside group 39 816 39 816 39 816 39 816 59 626 76 808 112 498 183 206 195 716 203 500 583 991 583 991 665 443 583 991 665 444 Treasury shares 665 442 625 626 625 626 625 626 625 626 605 816 588 634 552 944 482 236 469 726 461 942 81 451 81 451 1 81 453 30 059

original Bee allocation 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 442 665 444 665 444 695 503 Cap/issued/purchased shares 13 937 34 815 35 377 13 291 14 620 16 082 17 690 19 459 21 405 23 546 6 255 6 881 7 569 230 928

BBP 8 928 19 148 20 061 6 102 6 712 7 383 8 122 8 934 9 827 10 810 106 028 AG 2 724 6 296 7 431 3 280 3 608 3 969 4 366 4 802 5 282 5 811 47 569 Education 2 285 3 113 418 699 769 846 930 1 023 1 126 1 238 12 448 Discretionary 6 258 7 467 3 210 3 531 3 884 4 273 4 700 5 170 5 687 6 255 6 881 7 569 64 884

665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 688 988 671 697 672 325 673 013 926 431 Call option shares (325 614) (87 519) (413 133)

BBP (173 659) (173 659) AG (44 259) (44 259) Education (59 011) (59 011) Discretionary (48 684) (87 519) (136 203)

Shares expected at end 665 442 665 442 679 379 700 257 700 819 678 733 680 062 681 524 683 132 684 901 686 847 363 374 671 697 584 806 673 013 513 299


BEE DEAL – FORECAST ASSUMpTiONSThe following are the assumptions used for the South African BEE deal:

Changes in assumptions Forecast December 2010 December 2009

Timing of initial grant * August 2005 August 2005

Share price R87,90 for initial grantsR130.35 at December 2010 + 10% p.a. for future allocations

R87,90 for initial grantsR124.05 at December 2009 + 10% p.a. for future allocations

Timing of allocations Greater number allocated later (i.e. at higher share price) in line with latest fact pattern

Greater number allocated later (i.e. at higher share price) in line with latest fact pattern

Expected vesting criteria (Management Schemes)

Expected life to mirror experience in current employee schemes. Evenly spread between vesting and expiry dates at 50/50

Expected life to mirror experience in current employee schemes. Evenly spread between vesting and expiry dates at 50/50

Pricing of allocations Instrument values based on average share price on grant date Corporate and Non-executive Directors scheme issue prices based on R74,75 plus interest for all anticipated grants

Instrument values based on average share price on grant date Corporate and Non-executive Directors scheme issue prices based on R74,75 plus interest for all anticipated grants

Dividend yield Illustrative dividend yields Illustrative dividend yields

Participant drop-off rates Refined per scheme based on historical data increased for some

Refined per scheme based on historical data increased for some

* Grant date has impact on Black-Scholes valuation

69b

NEDBANK GROuP EMpLOYEE iNCENTivE SCHEMES

2010 2009

movementsInstruments outstanding at the beginning of the year 18 732 388 18 918 278Granted 4 581 240 5 274 418Exercised (5 200 338) (3 819 227)Expired (5 328 228) (333 979)Surrendered (1 114 433) (1 307 102)

Instruments outstanding at the end of the year 11 670 629 18 732 388

analysisNon-performance based options 1994 Scheme 43 500 628 280Performance based options and RSP’s 2005 Scheme 7 547 282p 11 180 686p

Non-performance based options and RSP’s 2005 Scheme 3 430 400 6 340 374Performance based matched shares 2005 Scheme 324 724 291 524Non-performance based matched shares 2005 Scheme 324 723 291 524

11 670 629 18 732 388

summary by schemeNedcor Group Employee Incentive Scheme (1994) 43 500 628 280Nedbank Group (2005) share option, matched and restricted share scheme 10 977 682 17 521 060Nedbank Group matched share scheme (2005) 649 447 583 048

Instruments outstanding at the end of the year 11 670 629 18 732 388

nedcor group employee incentive scheme (1994)The following options granted had not been exercised at 31 December 2010:

issueOption Number of priceexpiry date shares R

20-Apr-11 43 500 74.40


nedbank group (2005) share option, matched and restricted share scheme Share instruments:The following instruments granted had not been exercised at 31 December 2010:

Instrument Number of Priceexpiry date shares R

31-Dec-10 159 507p *31-Dec-10 92 208 *28-Feb-11 556 279 110.9804-Mar-11 1 735 427p *10-Aug-11 137 800 107.0312-Aug-11 156 125p *01-Jan-11 6 000 144.3001-Jan-11 8 900 134.3004-Mar-12 3 449 325p *12-Aug-12 582 315 *03-Mar-13 1 946 531p *04-Mar-13 1 946 531 *06-Aug-13 100 367p *07-Aug-13 100 367 *

Total 10 977 682

nedbank group matched shares scheme (2005):The obligation to deliver the following matched shares, 50% is subject to time and

the other 50% to performance criteria, exists at 31 December 2010:

Instrument Number ofexpiry date shares

01-Apr-11 252 14001-Apr-12 178 906 01-Apr-13 218 401

Total 649 447

P Performance-based instruments.

NEDBANK GROuP EMpLOYEE iNCENTivE SCHEMES continued

71b

SHAREHOLDERS’ ANALYSiSRegister date: 31 December 2010Authorised share capital: 600 000 000 sharesIssued share capital: 514 891 827 shares

Dec 2010 Dec 2009 major shareholders/managers Number of shares % holding % holding

Old Mutual Life Assurance Company (South Africa) Limited and associates 264 491 115 51,37 52,21 Nedbank Group treasury shares 66 327 716 12,89 12,63

BEE trusts:– Eyethu scheme – Nedbank South Africa 39 607 201 7,69 7,94 – Omufima scheme – Nedbank Namibia 722 240 0,14 0,15 Nedbank Group (2005) Share Option, Matched Share and

Restricted Share Scheme 11 003 534 2,14 1,53 Nedbank Group Limited and associates (Capital Management) 14 715 049 2,86 2,95 Nedbank Namibia Limited 47 512 0,01 0,01 NES Investments (Pty) Limited 232 180 0,05 0,05

Public Investment Corporation (SA) 33 212 027 6,45 5,78 Lazard Asset Management (uS) 15 228 510 2,96 6,00 Coronation Fund Managers (SA) 14 129 073 2,74 2,81 Sanlam Investment Management (SA) 11 235 331 2,18 2,20 STANLIB Asset Management (SA) 8 865 398 1,72 0,66BlackRock Inc (uS and uK) 7 088 356 1,38 1,20

Dec 2010 Dec 2009 major beneficial shareholders Number of shares % holding % holding

Old Mutual Life Assurance Company (South Africa) Limited and associates (SA) 264 491 115 51,37 52,21 Public Investment Corporation (SA) 39 286 687 7,63 7,42

Dec 2010 Dec 2009 geographical distribution of shareholders Number of shares % holding % holding

Domestic 448 155 287 87,04 86,42

– South Africa 437 206 579 84,91 85,17 – Namibia 8 294 868 1,61 0,67 – Swaziland 154 470 0,03– unclassified 2 499 370 0,49 0,58

Foreign 66 736 540 12,96 13,58

– united States of America 44 616 660 8,66 9,74 – united Kingdom and Ireland 7 705 099 1,50 1,10 – Europe 5 891 733 1,14 1,10 – Other countries 8 523 048 1,66 1,64

514 891 827 100,00 100,00


NEDBANK LIMITED CONSOLiDATED STATEMENT OF COMpREHENSivE iNCOMEFOR THE yEAR ENDED 31 DECEMBER

Rm 2010 2009

Interest and similar income 43 421 49 332 Interest expense and similar charges 27 556 33 795

Net interest income 15 865 15 537 Impairments charge on loans and advances 6 360 6 659

Income from lending activities 9 505 8 878 Non-interest revenue 10 741 10 338

Operating income 20 246 19 216 Total expenses 14 983 13 792

Operating expenses 14 838 13 674 BEE transaction expenses 145 118

Indirect taxation 387 402

Profit from operations before non-trading and capital items 4 876 5 022 Non-trading and capital items (103) (32)

Profit on sale of subsidiaries, investments, property and equipment (17) (22)Net impairment of investments, property, equipment and capitalised development costs (86) (10)

Profit from operations 4 773 4 990 Share of profits of associates and joint ventures (1)

Profit before direct taxation 4 773 4 989 Total direct taxation 983 960

Direct taxation 985 959 Taxation on non-trading and capital items (2) 1

profit for the year 3 790 4 029

Other comprehensive income net of taxation 118 264

Exchange differences on translating foreign operations (15) 32 Fair value adjustments on available-for-sale assets (31) 146 Gains on property revaluations 164 86

total comprehensive income for the year 3 908 4 293

Profit attributable to:Equity holders of the parent 3 737 3 790 Non-controlling interest ordinary shareholders 53 224 Non-controlling interest preference shareholders 15

profit for the year 3 790 4 029

Total comprehensive income attributable to:Equity holders of the parent 3 855 4 054 Non-controlling interest ordinary shareholders 53 224 Non-controlling interest preference shareholders 15

total comprehensive income for the year 3 908 4 293

earnIngs reConCIlIaTIonProfit attributable to equity holders of the parent 3 737 3 790 Less: Non-headline earnings items (101) (33)

Non-trading and capital items (103) (32)Taxation on non-trading and capital items 2 (1)

headline earnings 3 838 3 823

73b

NEDBANK LIMITED CONSOLiDATED STATEMENT OF FiNANCiAL pOSiTiON

AT 31 DECEMBER

Rm 2010 2009

asseTsCash and cash equivalents 7 469 6 823 Other short-term securities 21 955 14 408 Derivative financial instruments 14 077 12 871 Government and other securities 31 667 35 754 Loans and advances 469 527 444 403 Other assets 3 613 3 917 Clients’ indebtedness for acceptances 1 920 2 025 Current taxation receivable 440 580 Investment securities 2 999 3 012 Non-current assets held for sale 5 12 Investments in associate companies and joint ventures 933 922 Deferred taxation asset 48 36 Investment property 82 102 Property and equipment 5 394 4 754 Long-term employee benefit assets 1 965 1 783 Computer software and capitalised development costs 1 938 1 761 Goodwill 1 390 1 390 Mandatory reserve deposits with central bank 11 068 10 437

total assets 576 490 544 990


total equity attributable to equity holders of the parent 34 730 32 623 Preference share capital and premium 3 560 3 483 Minority shareholders’ equity attributable to ordinary shareholders 110 1 796 Minority shareholders’ equity attributable to preference shareholders 91

total equity 38 400 37 993 Derivative financial instruments 11 930 10 799 Amounts owed to depositors 489 118 465 899 Other liabilities 6 179 5 218 Liabilities under acceptances 1 920 2 025 Current taxation liabilities 76 162 Deferred taxation liabilities 1 358 1 514 Long-term employee benefit liabilities 1 408 1 298 Long-term debt instruments 26 101 20 082

total liabilities 538 090 506 997

total equity and liabilities 576 490 544 990

Guarantees on behalf of clients 29 185 27 827


RiSK AND BALANCE SHEET MANAgEMENT REviEW

hIghlIghTsregulaTory and sTaTuTory developMenTs• Basel iii – Majority of the proposals are now finalised but some significant aspects are still outstanding. – Studies and opinions of the impact of Basel III on the banking industry and economic growth vary. – Implementation timelines extended considerably, commencing in 2013 with various phase-ins and transitional arrangements

through to 2019.

– On capital ■ Most heavily impacted are banks with relatively large capital market businesses, particularly trading activities,

securitisations, over-the-counter derivatives (counterparty credit risk) and securities lending. ■ Nedbank Group has a relatively small capital markets business and the overall impact is manageable.

– On liquidity ■ Internationally most banks generally fall short of the two new liquidity ratios, with shortfalls in high-quality liquid

assets and stable funding presenting significant business model implications. Both ratios remain under observation and banks have several years to meet them.

In particular, the net stable funding ratio (NSFR), in its current form, seems likely to significantly curtail longer-term lending. This is contrary to the primary role of banks to act as regulated financial intermediaries to convert short-term deposits into long-term lending, which enables economies to grow.

■ For Nedbank Group and generally the entire SA banking industry the impact of these two liquidity ratios would be pervasive if implemented as is, particularly the NSFR. However, a pragmatic approach is likely to be followed by the South African Reserve Bank (SARB).

• Solvency ii – Solvency Assessment and Management (SAM) is expected to be implemented in South Africa from 2014. SAM is South

Africa’s version of the international Solvency II requirements, which is similar to Basel II but for the insurance industry. – Impact on Nedbank Group (in the Nedbank Wealth Cluster only) is relatively small.

• Companies Act – The Companies Act 71 of 2008 required significant amendment. The Companies Amendment Bill, which is expected to come

into force on 1 April 2011, amends almost every section of the original act and the regulations are currently in draft form.

– For Nedbank Group and the SA banking industry the effect of the unintended consequences of S136(2) was addressed through the Banking Association of South Africa and the proposed revisions should resolve these concerns. Nedbank Group is assessing the full effect that this new act will have on its business.

• The Consumer protection Act – SA banks are required to be compliant by 31 March 2011. – Nedbank Group awaits the final regulations to complete its compliance programme.

• protection of personal information Act – It is expected that the Protection of Personal Information Bill will be passed into law during the Parliamentary first quarter

of 2011.

CapITal adequaCy • Regulatory capital – Nedbank Group’s capital ratios continued to strengthen year-on-year.

■ Core Tier 1: 10,1% (2009: 9,9%) ■ Tier 1: 11,7% (2009: 11,5%) ■ Total: 15,0% (2009: 14,9%)

– This strengthening occurred despite using internal capital resources to buy out the minorities in Imperial Bank, the negative impact on risk-weighted assets (RWA) of its integration into Nedbank Limited, and the impairment as intangible assets, rather than being treated as fixed assets, of capitalised software and development costs that was previously only expected from 2013 onwards under the new Basel III requirements. This is reflective of continuing, successful capital and RWA optimisation in Nedbank Group.

▲

▲

75b

– Given the predominant focus on the core Tier 1 ratio by Basel III, and new requirements to ensure all classes of capital instruments fully absorb losses at the point of non-viability before taxpayers are exposed to loss, all of which will be phased-in over time (see page 79), Nedbank Group’s focus is firmly on its core Tier 1 ratio.

In consideration of Nedbank Group’s high total capital adequacy ratio of 15,0% the Imperial Bank Tier 2 bond (‘IPB2’), amounting to R500 million, was called (without being replaced) and the intention is to do the same with the Nedbank Limited bond (‘Ned 5’) that is callable in April 2011, subject to SARB approval.

• Economic capital – Available financial resources: Economic capital ratio 144% (2009: 142%). R12 784 million surplus capital above minimum

requirements plus the 10% buffer. – During 2010 the group implemented several refinements to the calculation and allocation of economic capital.

• internal Capital Adequacy Assessment process – The annual group Internal Capital Adequacy Assessment Process (ICAAP) was completed and signed off by the board

in July 2010. The SARB’s Supervisory Review and Evaluation Process (SREP) of Nedbank Group’s ICAAP was concluded favourably in H2 2010 with no material issues raised.

– Best-practice stress and scenario testing framework and process were followed to confirm the robustness of the group’s capital adequacy.

• Leverage ratio – This remains low at 13,8 times (2009: 14,4 times) when compared with international levels.

• External credit ratings – In July 2010 Moody’s Investor Services reaffirmed Nedbank Limited’s financial strength rating at C- and its global local

currency rating at A2. The outlook for all ratings was also maintained at stable. – In July 2010 Fitch Ratings reaffirmed Nedbank Group’s long-term foreign and local currency issuer default rating (IDR) at

BBB, and national long-term rating at AA-(zaf). The short-term foreign currency IDR was maintained at F2. The outlook for all three ratings was also maintained at stable.

FundIng and lIquIdITy• Well managed through another difficult and uncertain year in global banking.• Significantly lengthened the long-term funding ratio to 23% (2009: 18%), including successful issue of R6,2 billion in senior

unsecured debt during 2010.

▲

CApiTAL ADEqUACY

16,0

14,0

12,0

10,0

8,0

6,0

4,0

2,0

0,0

%

DECEMBER 2010

INTERNAL TARGET RANGES

* Surplus (Rbillion) above regulatory minima

DECEMBER 2009

11,7%11,5%

8,5 – 10,0

15,0%

11,5 – 13,0

14,9%

ESTIMATED BASEL III AT 2010

10,1%9,9%

7,5 – 9,0

*15,3 *15,6

*14,8 *15,3

*13,5 *13,9

Core tier 1 tier 1 total

Nedbank could already absorb the Basel III capital implications, with all capital ratios remaining above the top end of current target ranges.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued

• Matched maturity funds transfer pricing (MMFTP) and liquidity premiums (pricing for liquidity risk) well entrenched across the business.

• Sound loan-to-deposit ratio of 97%.• Further strengthened the liquidity buffer.• Well-diversified funding mix (ie retail versus wholesale deposit reliance) and strong retail household deposits positioning maintained.• Low reliance on interbank and foreign markets.• Internal Liquidity Adequacy Assessment Process introduced and embedded within the organisation, a similar concept to ICAAP.

MargIn ManageMenT• Net interest margin (NIM) reduced to 3,35% (2009: 3,39%) mainly due to the impact of endowment (on capital and non-

rate-sensitive liabilities) and costs of lengthening the funding profile and holding a higher liquidity buffer.• However, NIM has performed better than originally forecast due to a strong focus on asset pricing and mix (as per manage-

for-value strategy), application of MMFTP, allocation of risk-based capital and liquidity premiums among growth and market share gains across most categories of advances (with the exception of home loans in line with group strategy of focusing on areas with high economic profit potential).

Changes To and sarb approval For CerTaIn MeThodologIes• Advanced Measurement Approach and internal Model Approach

– Received approval from the SARB to use the Advanced Measurement Approach (AMA) for operational risk (from 2010) and Internal Model Approach (IMA) for market trading risk (from 2011) for regulatory capital purposes for Nedbank Limited.

– Nedbank Limited now has approval for all three major Pillar 1 risk types for Basel II, having received approval for the Advanced Internal Ratings-based (AIRB) Approach for credit risk on day 1 implementation of Basel II (January 2008).

– The regulatory capital approaches above now align with those already in use for economic capital (and ICAAP) purposes. This contributes to Nedbank Group’s RWA optimisation while representing a more sophisticated measurement of risk.

• Capital allocation to businesses (as discussed in the June 2010 results) – Increase in quantum of economic capital allocated to businesses for risk-adjusted performance measurement and segmental

analysis due to methodology enhancements and alignment with the higher group regulatory core Tier 1 capital level.

• Credit loss ratio (as discussed in the June 2010 results) – Change in calculation from simple average to daily averages and exclusion of trading assets to reflect the ratio more accurately.

rIsk ManageMenT• Strong credit risk management. – The credit loss ratio on the banking book improved to 1,36% [2009: 1,52% (restated)]. – Defaulted advances reduced by 1,04% to R26 765 million (2009: R27 045 million). – Maintained a conservative approach and total impairment provisions increased by 14,6% to R11 226 million (2009:

R9 798 million). – Sound credit growth achieved in current external economic environment under the bank’s manage-for-value strategic focus

on improving assets quality through active management of the bank’s portfolios towards high economic profit areas.

• Group’s Enterprisewide Risk Management Framework continued to be resilient.• Sound risk governance and compliance prevails, aligned with Basel requirements.• Effective operational and security risk management, containing impact of crime to reasonable levels.• Alternative operational risks to sustainability, such as environmental and transformation risks, well managed by the group.• Successful reputational risk management, such as the favourable Securities Regulation Panel ruling on the Pinnacle Point

litigation.• Successful Imperial Bank integration into Nedbank Limited.• Significant steps to enhance risk management in Nedbank Retail and to fix economics in secured lending.• Prudent risk appetite followed with group metrics cascaded into all business units.• Risk-based remuneration practices applied since 2008 align in all material respects with recent international requirements.• Robust capital and liquidity risk management.

For the group’s comprehensive disclosure on risk and balance sheet management in line with Regulation 43 of the regulations relating to banks in South Africa, please refer to the group’s updated Pillar 3 Report that will be released on the group’s website at www.nedbankgroup.co.za by 8 April 2011. This summary review primarily focuses on the key financial risks and balance sheet management components.

▲

▲

▲

77b

InTroduCTIonThe SA economy had a strong start to the year primarily driven by

global demand for commodities and manufacturing production.

However, the fragility of the global recovery as a result of high

government debt in developed economies was highlighted by

fiscal consolidation in European economies during the course of

the year. This impacted global demand for SA exports, resulting

in the domestic recovery losing momentum despite the boost

from the FIFA 2010 World Cup. Against this backdrop the

domestic banking environment improved modestly, supported

by 30-year-low interest rates that translated to an improved

credit environment.

The landscape of banking continues to change following the

global financial crisis, although the Euro region remains a major

concern, and the significant international regulatory response in

particular to what is commonly referred to as Basel III.

basel IIIMost of the Basel III proposals have recently been finalised, with

some significant aspects remaining outstanding, but envisaged

to be completed in 2011.

Considerable debate continues on the impact of Basel III on the

banking industry and, consequently, economic growth. Particular

focus has fallen on the new liquidity ratios and the cumulative

impact of the vast array of new Basel III requirements, especially

when considering forward growth projections. In South Africa

the details of exactly how Basel III will be adopted are still to be

advised by the SARB.

suMMary oF basel III• New Basel ii.v requirements (finalised in July 2009)

– Enhancements to pillar 1

■ Securitisation

■ Trading market risk

– Enhancements to pillar 2 [and hence the ICAAP]

■ Bankwide governance and risk management

■ Principles for sound liquidity risk management

■ Principles for risk concentrations

■ Sound remuneration practices (risk-based)

■ Valuation and liquidity risks of financial instrument

fair-value practices

■ Principles for sound stress testing practices

■ Off-balance-sheet exposures and securitisation activities

■ Reputational risk and implicit support

– Enhancements to pillar 3 (public disclosure)

■ Securitisation exposures

The above are incorporated into the draft changes to the

SA banking regulations, effective 1 January 2012.

In addition, the SARB are proposing to entirely phase out

hybrid debt capital (non-core Tier 1), which is contrary to

Basel III that allows for existing hybrid debt to remain, and

introduce a 1,06 multiplier to credit RWA of AIRB banks (to

align with the original Basel II Accord).

• Basel iii requirements (finalised in December 2010)

– Raise quality, consistency and transparency of capital

base

– Enhance risk coverage

– Introduce new leverage ratio

– Reduce procyclicality and introduce new countercyclical

buffers

– Address systemic risk and interconnectedness

– Introduce new global liquidity framework [notably the

new liquidity coverage ratio (LCR) and NSFR]

– Basel III timelines

■ Commence 2013 with long phase-ins through to 2019

(see page 79)

There is no formal indication yet from the SARB on South

Africa’s adoption, other than ‘South African banks will not

need to raise additional capital in response to Basel III’ and

that ‘a pragmatic approach will be followed in respect of the

new Basel III liquidity ratios’.

• Basel iii requirements (work in progress; to be finalised

during 2011)

– Capital surcharge for systemically important financial

institutions (SIFIs)

– Loss absorbency requirements for all capital instruments

(finalised in January 2011)

– Counterparty credit risk

– Trading book review

– Convergence with International Financial Reporting

Standards

• Observation periods commence in 2011/2012 for:

– New liquidity ratios (LCR and NSFR)

– New leverage ratio

In summary, greater clarity and finalisation have been achieved

to date, but significant uncertainty remains.

poTenTIal IMpaCT on nedbank group oF key basel III CoMponenTs• Capital

– Overall, considered to be ‘manageable’ but await

finalisation of the outstanding Basel III requirements and

details from the SARB for adoption in South Africa.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued – SA banks’ regulatory capital rules were already considerably

more conservative than the Basel II international rules.

The Tier 1 minimum ratio is 7% in South Africa, while

the core Tier 1 minimum is 5,25%. In addition, a unique

to South Africa, 1,5% Pillar 2a capital buffer is already in

force. All the major SA banks are currently operating at

capital ratios significantly above the minimum regulatory

ratios required.

– Core Tier 1 capital is the main focus. In view of the new

Basel III capital buffers, it is likely that Nedbank Group’s

target may increase from the current 7,5% – 9,0%. The

group expects to meet this via earnings, continuing

capital and RWA optimisation, the strategic positioning of

products, business mix and our new portfolio tilt strategic

focus, integrated with the efforts of enhancing return

on ordinary shareholders’ funds (RoE) and optimising

economic profit.

– Nedbank Group has a strong track record over the past

three years of significant capital and RWA optimisation.

This is expected to continue.

– The new Basel III regulatory deductions against core Tier 1

qualifying capital resources only commence in January

2014. These deductions are not significant for Nedbank

Group.

– Hybrid debt capital (non-core Tier 1) will be phased out

by the SARB. The group’s Tier 2 debt capital also needs to

be addressed (replace and reduce the extent in view of the

new Basel III loss absorbency requirements) over the long

transitional period.

– All the major SA banks have also completed three

comprehensive, annual ICAAPs since 2008. These are

required to be signed off by the board of directors of each

bank and are then subjected to a detailed SREP by the

SARB.

• Leverage

– No challenges are envisaged in terms of compliance with

Basel III’s new leverage ratio, which includes off-balance-

sheet exposure.

• Risk coverage

– The Basel III requirements will impact most significantly

on banks with large capital markets businesses. Higher

RWA requirements will primarily come from trading

books, securitisations, securities lending and over-the-

counter derivatives.

– Nedbank Group’s trading book is small in relation to

its total bank operations, securitisation exposure and

activities are very low, and counterparty credit risk,

including repurchase transactions and securities financing,

is mostly restricted to low-risk, non-complex transactions.

Credit derivative activities are also restricted to single-

name trades of SA exposures and biased towards providing

risk mitigation.

The group does not envisage a significant overall increase

in minimum capital or RWA requirements, subject to the

outcome of the Basel III proposals still to be finalised in

2011.

In particular, the outstanding Basel III proposals on SIFIs

and counterparty credit risk do need to be finalised before

a conclusion can be reached on this aspect. In South Africa

a unique Pillar 2 add-on of 1,5% already exists, additional

to the minimum Basel II total ratio requirement of 8%.

• Remuneration

– As regards the emphasis on ‘risk-based’ remuneration

together with additional sound governance practices,

Nedbank Group is very well positioned and has only a few

minor gaps to close (see the Remuneration Report in the

Nedbank Group 2010 Annual Report).

79b

basel III suMMary oF deCeMber 2010 announCeMenTs

SARB* BASEL II BASEL III**

( = shading indicates transition periods)

As is %

As is %

2011%

2012%

2013%

2014%

2015%

2016%

2017%

2018%

2019%

CApiTAL Core Tier 1 ratio (minimum) 5,25 2,0 3,5 4,0 4,5 4,5 4,5 4,5 4,5

Capital conservation buffer (CCB1) N/A N/A 0,625 1,25 1,875 2,50

Countercyclical Capital Buffer (CCB2) N/A N/A 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5 0 – 2,5

(is an extension of CCB1 when there is excessive credit growth – from time to time at discretion of local regulator)

Core Tier 1 ratio plus CCB 1 (minimum) 5,25 2,0 3,5 4,0 4,5 5,125 5,75 6,375 7,0

Total Tier 1 ratio capital (minimum) 7,0 4,0 4,5 5,5 6,0 6,0 6,0 6,0 6,0

Total capital ratio (minimum) 9,5 8,0 8,0 8,0 8,0 8,0 8,0 8,0 8,0

Total capital ratio plus CCB1 (minimum) 9,5 8,0 8,0 8,0 8,0 8,625 9,25 9,875 10,5

phase-in of new regulatory deductions to qualifying capital 20 40 60 80 100 100

Capital instruments that no longer qualify as non-core Tier 1 capital or Tier 2 capital

Earlier of phaseout over 10-year horizon beginning 2013 or call/stepup date (only instruments issued pre 12 September 2010 qualify for transition period).

SiFis and new issues of capital instruments

Work continues on an integrated approach to SIFIs that could include additional capital surcharges, contingent capital and bail-in debt. In addition, strengthening the loss absorbency of non-core Tier 1 and Tier 2 capital instruments, and a proposal to ensure the loss absorbency at the point of non-viability.

LiqUiDiTY LCR

The LCR identifies the amount of unencumbered, high quality liquid assets an institution is required to hold in order to offset the cumulative net cash outflows it would encounter under an acute short-term (30 day) stress scenario.

N/A N/A

Obs

erva

tion

perio

dbe

gins

Intr

oduc

e m

inim

umst

anda

rd

NSFR

The NSFR measures the amount of longer-term, stable funding sources required by an institution given the liquidity profile of its assets and the contingent liquidity risk arising from off-balance-sheet exposures. N/A N/A

Obs

erva

tion

perio

d b

egin

s

Intr

oduc

e m

inim

um s

tand

ard

The standard requires a minimum amount of funding that is expected to be stable over a one year horizon based on liquidity risk factors assigned to assets and off-balance sheet exposures.

LEvERAgE

Leverage ratio

N/A N/A Supervisory monitoring

Parallel run Migra-tion to

Pillar 1

Includes on and off-balance sheet exposure

1 January 2013 – 1 January 2017Disclosure starts 1 January 2015

* Uncertain as to what changes, if any, the SARB will now make to the minimum regulatory capital and buffer levels in South Africa.

** All dates are as of 1 January.

Stock of high quality liquid assets

Net cash outflows over a 30-day time period≥ 100%

Available amount of stable funding

Required amount of stable funding≥ 100%


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued• Liquidity

– Although the implementation timelines have been

extended considerably, compliance with the two proposed

liquidity ratios (especially the NSFR) remains the major

concern for SA banks, unless benefits arise from National

Treasury’s Structural Funding and Liquidity Task Team,

which is addressing this issue and the structural issues in

the country’s financial industry.

– SA’s banking industry has remained structurally sound and

weathered the global financial crisis and local recession

well due to a number of factors, including:

■ Sound and proactive regulation of financial services,

especially in the banking sector.

■ Strong risk and capital management in the SA banking

industry.

■ Basel II being successfully implemented and embraced

in South Africa.

■ The National Credit Act (NCA) being successfully

implemented in South Africa to help minimise

irresponsible lending practices, overgearing and

excessive consumer debt.

■ Fiscal authorities in South Africa never allowing

interest rates to fall as low, and for as long, as those

in the united States, where this resulted in excessive

borrowing and untenable levels of household debt.

South Africa has not had negative real interest rates.

■ Exchange controls preventing large flows of funds

from local institutions out of the country.

■ Low reliance on foreign funding/capital markets.

■ Rand liquidity remaining stable, with the interbank

market operating normally.

■ The originate-and-sell business model and complex

credit derivatives and/or securitisation vehicles, which

resulted in excessive leverage in some foreign banks,

not being implemented and used in South Africa to the

same extent.

■ Charging of liquidity premiums in client borrowings

and improved asset pricing.

■ Lessons learned from the 2002/3 SA banking crisis.

Government support was not required by the SA banking

industry at any time during this global financial crisis.

While always striving to maintain close alignment with

Basel III standards, for the factors set out above South Africa

would be justified in appropriately modifying the specific

requirements of the proposed liquidity ratios in Basel III.

– Nedbank Group fully subscribes to the principles set out

in the Basel III liquidity risk framework and has already

embedded these principles into its existing liquidity risk

management framework. By way of example, Nedbank

Group is compliant with the ‘Principles for Sound Liquidity

Risk Management and Supervision’ that were issued in

September 2008.

– In terms of revising the regulations it is broadly

anticipated that the SARB will subscribe to the principles

encapsulated in the proposed Basel III liquidity standards.

However, it is also anticipated that, given the structural

factors impacting the ability of SA banks to comply with

the ‘as is’ proposed liquidity ratios, the SARB will follow

a pragmatic approach in terms of what can be achieved,

without creating unintended consequences (eg slower

economic growth and higher unemployment).

‘Once finalised in the course of 2010 by the Basel

Committee, these requirements related to a stressed

liquidity coverage ratio, and a structural liquidity ratio will be

considered for incorporation into the regulatory framework.

However, ultimately, liquidity in the SA financial sector is

mainly a structural matter that is likely to require extensive

dialogue between various key roleplayers such as the

National Treasury, the central bank, the Financial Services

Board and the Department’ (2009 Annual Report, Bank

Supervision Department, South African Reserve Bank).

– Compliance with the LCR and the NSFR are not related

to issues of principle but rather to specific factors and, in

particular, the structural issues, benefits and characteristics

of the SA financial system.

We have graphically depicted below the manner in

which SA banks are currently funded, based on the latest

industry data.

We draw the following conclusions of total SA bank

funding from this data:

■ Only 16% emanates from household deposits.

■ Capital markets only contribute 6%, with foreign

capital markets contributing only 2%.

■ Other funding, which includes deposits from local

corporates denominated in foreign currency, only

represents 4%.

■ Wholesale and commercial deposits, which attract

the most adverse treatment in terms of the proposed

Basel III ratios, represent 72%.

81b

On the liability side of the balance sheet, in order to improve both the LCR and NSFR, SA banks would potentially need to do the following:

■ Increase the proportion of deposits from households significantly in order to proportionally reduce deposits from wholesale and corporate depositors.

■ Lengthen the funding profile through increased capital market issuance, both domestically and internationally.

– However, the structural challenges likely to constrain SA banks, in terms of executing the strategies outlined above, include:

■ Low levels of retail savings. ■ The small SA capital market. ■ Expensive offshore markets being constrained by

overall appetite for emerging-market paper. ■ Regulations that limit the structural duration of the

domestic money market. ■ An insufficient pool of liquid assets.

– While the SARB has given no formal indication regarding its approach to adopting and/or modifying the proposed Basel III liquidity ratios, the following possibilities exist:

■ Adopt a pragmatic approach on the basis that the Basel III proposed liquidity ratios do not take the following into account:

❍ The ‘closed’ nature of SA’s money markets, resulting from exchange controls and the mechanics of the domestic settlement and clearing system, ie rands are more ‘sticky’ for SA banks (in the rand system)

than for euro- or dollar-denominated banks (in their respective systems) whose systems are more ‘open’.

❍ The fact that the large SA asset managers (of which there are approximately 16) have only five major banks with which to deposit funds. In Europe and the uS there are many more banks, implying that their wholesale funding is less ‘sticky’ compared with South Africa.

❍ Given that liquidity risk is a consequential risk, legislation such as the NCA reduces systemic risk and the need for oversized liquidity buffers. Many developed economies do not yet have the safety net of NCA-type legislation. In South Africa the NCA prohibits the originate-to-distribute model that was at the heart of the uS sub-prime crisis. This additional SA safety net should be considered when setting minimum levels of compliance for the ratios.

❍ SA banks have proportionally higher core Tier 1 capital levels compared with many of the international banks. The conservative capital structure of SA banks, with more loss-absorbing permanent capital, should also be considered when setting the minimum SA liquidity standards.

❍ A strong capital base can help to mitigate liquidity risk both by providing a capital buffer to allow an entity to raise funds and deploy them in liquid positions and by serving to reduce the credit risk taken by providers of funds to the group.

❍ unlike the uS, which has not yet embedded Basel II, South Africa has fully embraced the principles of Basel II with robust risk management approaches having been adopted by the domestic banks.

TOTAL DOMESTiC BANK FUNDiNg R2,6 TRiLLiON (AS AT 30 NOvEMBER 2010)

wholesaledeposits

R1 094 billion42%

Commercialdeposits

R768 billion30%

householddeposits

R402 billion16%

Capital markets

R148 billion6%

other funding

R120 billion4%

Foreign funding

R59 billion2%

Funding mix (r billion)

% of total funding base

DomestiC marKet oFFshore marKet


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued ❍ The Basel III document requires banks to assume

that 100% of wholesale deposits (maturing over the

next 30 days) flow out of the bank. Applying a look-

through principle to money market funds it could

be argued that the underlying depositor is retail in

nature. To assume that 100% of these funds would

therefore leave the bank over a 30-day time horizon

(as per the LCR) may be a material overstatement in

the SA market.

❍ Basel III distinguishes between small business and ‘all

other business’, which typically includes medium-

sized businesses, large businesses and corporate

businesses with professional treasuries. All other

businesses are treated equally in that 75% of their

deposits are assumed to leave the bank within a 30-

day interval (assuming they have a low operational

relationship with the bank). We believe that there is

considerable scope to differentiate between medium,

large and corporate-type commercial clients in the

SA environment.

■ Broaden the definition of high-quality assets

considered to be eligible in terms of the LCR.

❍ While addressing the structural issues through

National Treasury’s Structural Funding and

Liquidity Task Team is a longer-term initiative,

the SARB could in the short-term consider

broadening the definition of high-quality

assets. That is, in addition to the Basel III level 1

and 2 liquid assets, the SARB could introduce

level 3 and 4 assets (eg other bank debt such as

negotiable certificates of deposit, promissory notes

and floating rate notes).

■ Allow the creation of ‘collateral pools’ for inclusion in

the stock of high-quality liquid assets.

❍ In view of the structural constraints to lengthening

the funding profile or replacing wholesale funding

with retail deposits, that is limitations in terms of

addressing the liability side of the balance sheet,

a key consideration is addressing the asset side of

the balance sheet by bolstering the stock of liquid

assets via converting typically long-dated illiquid

assets into high-quality liquid assets.

❍ An option for consideration is to allow banks to

create ‘collateral pools’ that meet preagreed SARB

requirements (eg maximum loan-to-value, minimum

seasoning or payment to income ratios) and which

may be pledged as security against stress funding.

These ‘collateral pools’ could then be included in the

stock of liquid assets making up the LCR.

■ Introduction of a national deposit insurance scheme.

❍ South Africa is not aligned with many other

jurisdictions in terms of deposit insurance schemes.

The impact of this needs to be considered as

SA banks’ liquidity ratios will reflect negatively

compared with international jurisdictions with

deposit insurance schemes as, in terms of the Basel

III ratios and definitions, such a scheme is required

in order to classify deposits as ‘stable’ and thus

receive a more favourable treatment.

– Nedbank Group’s additional possible courses of action

could include:

■ Purchasing further level 1 assets (including government

bonds, treasury bills, debentures) assuming this

quantum of level 1 assets would be available. This

would not have a pervasive impact on projected ROEs.

■ Structuring certain new corporate lending in the

form of A- or better corporate bonds rather than as

advances (client dependent) in order to increase the

market capacity of level two assets.

■ Through Nedbank Group’s new portfolio tilt strategic

approach, reducing certain long-dated lending.

■ utilising Nedbank Group’s well-diversified funding mix

supported by a strong retail and commercial deposit

franchise (and a strong market share of household

deposits).

■ utilising the domestic and international capital

markets, for example securitisation vehicles, as this

market is opening up again and is starting to show

signs of improved liquidity.

CredIT rIskThe recovery in the credit cycle has proven to be more modest

compared with previous cycles. Household demand for credit

was contained by the consumer debt burden remaining relatively

high, increased regulatory requirements, policy uncertainty and

employment growth only resuming late in the year, resulting

in a less broad-based recovery. In the corporate sector excess

capacity and uncertainty over the sustainability of the local and

global recovery limited spending. Government fixed-investment

spending, although continuing to contract, emerged as the main

foundation for growth.

Household finances improved in South Africa as debt was

slowly reduced and interest rates eased to the lowest levels in

36 years. Against this background, the ratio of household debt to

disposable income decreased to 78,2% from just over 80% at

the end of 2009. At the same time debt service costs decreased

to 7,5%, the lowest level since June 2006, and are now at a level

that is more conducive to improving economic growth in the

consumer sector.

83b

Nedbank Group gross loans and advances grew ahead of the industry at 5,7% to R486 billion (2009: R460 billion):

* 2009 restated to include Imperial Bank loans and advances.

^ 2009 restated to exclude Nedbank Wealth loans and advances.

** These relate to eliminations passed through Central Management.

Nedbank Corporate advances grew by 8,0%. Nedbank Business Banking advances ended marginally up with R12 billion of new

advances being offset to a large extent by repayments of other loans. The repositioning of Nedbank Retail resulted in home loans

decreasing, as planned, by 0,2% while there was stronger growth in personal loans, cards and vehicle and asset finance of 37,7%, 7,9%

and 13,3%, respectively. Core banking advances in Nedbank Capital grew by 2,6% with R10,8 billion of new advances largely offset by

repayments. The strength of the rand and the investment in uK treasury bills, compared with previous placements with other banks,

led to a decrease in advances in Nedbank Wealth.

The change in loans and advances by business cluster and by product are given in the tables that follow.

neT loans and advanCes by busIness ClusTer

Rm % change 2010

2009

(Restated)*

Nedbank Capital 12,7 62 328 55 315Nedbank Corporate 8,0 157 703 146 035Total Nedbank Retail and Business Banking 3,5 238 099 230 000

Nedbank Retail 4,1 187 334 179 885Nedbank Business Banking 1,3 50 765 50 115

Nedbank Wealth (11,6) 16 869 19 089Other >(100,0) 274 (138)

Net loans and advances 5,5 475 273 450 301

* 2009 restated to include Imperial Bank loans and advances and disclose Nedbank Wealth separately.

1,3%

(11,8%)

>(100%)

4,4%

8,0%

13,6%

gROSS LOANS AND ADvANCES BY BUSiNESS CLUSTER

500 000

450 000

400 000

350 000

300 000

250 000

200 000

150 000

100 000

50 000

0

rm

2009 2010

NEDBANK CAPITAL

NEDBANK CORPORATE*

NEDBANK RETAIL*^

NEDBANK BuSINESS BANKING

NEDBANK WEALTH

19 245 16 976(140)** 273**

186 725 194 906

147 235 159 072

55 69963 251

51 335 52 021

460 099

486 499


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedsuMMary oF loans and advanCes by produCT

Rm % change 2010

2009

(Restated)*

Home loans 0,7 145 895 144 921Commercial mortgages 6,7 86 100 80 672Properties in possession (25,4) 662 887Credit cards 7,9 7 910 7 334Overdrafts 20,0 13 307 11 093Term loans 9,2 74 605 68 321Overnight loans 1,1 12 552 12 420Other loans to clients (0,7) 42 897 43 203Leases and instalment sales 5,9 67 881 64 128Preference shares and debentures 23,2 20 499 16 633Factoring accounts 46,9 3 202 2 179Deposits placed under reverse repurchase agreements 35,2 10 849 8 026Trade, other bills and bankers’ acceptances (50,4) 140 282

Gross loans and advances 5,7 486 499 460 099Impairment of loans and advances 14,6 (11 226) (9 798)

Net loans and advances 5,5 475 273 450 301

* Comparative results have been restated for the integration of Imperial Bank. Mortgage loans as migrated to the Property Finance

division have been reclassified from home loans to commercial mortgages and those to Nedbank Retail have been reclassified from

commercial mortgages to home loans in line with the group’s reporting. The net result of this reclassification is a R4,2 billion adjustment

from home loans to commercial mortgages.

suMMary oF loans and advanCes by seCTor

Rm % change 2010 2009

Individuals 4,5 190 283 182 102Financial services, insurance and real estate 33,0 119 298 89 685Banks 46,3 17 478 11 944Manufacturing 10,9 30 875 27 839Building and property development 16,1 11 735 10 109Transport, storage and communication 5,2 30 767 29 253Retailers, catering and accommodation (24,2) 7 632 10 064Wholesale and trade (9,1) 7 408 8 146Mining and quarrying (22,9) 16 839 21 830Agriculture, forestry and fishing 5,6 5 613 5 317Government and public sector (47,0) 7 958 15 003Other services (16,8) 40 613 48 807

gross loans and advances 5,7 486 499 460 099

85b

The Basel II on-balance-sheet exposure at year-end is R569 billion (2009: R542 billion). The reconciliation of the Basel II exposure to

the gross loans and advances of R486 billion is shown below.

balanCe sheeT CredIT exposure** per basel II asseT Class and busIness ClusTer

Regulated

RmNedbankCapital*

NedbankCorporate*

TotalNedbank

Retail andBusinessBanking

NedbankRetail

NedbankBusinessBanking

NedbankWealth

CentralManage-

ment 20102009

(Restated)

Advanced internal Ratings-based (AiRB) Approach 85 103 141 570 194 785 142 536 52 249 12 237 18 071 451 766 431 493

Corporate 24 125 71 123 6 403 6 403 1 101 652 92 400Specialised lending – high-volatility commercial real estate 6 740 6 740 7 442Specialised lending – income-producing real estate 41 567 2 369 2 369 43 936 42 209Specialised lending – object finance 439Specialised lending – commodities finance 67 67 55Specialised lending – project finance 2 097 2 097 4 811Small and medium enterprises (SME) – corporate 631 4 066 22 879 22 879 27 576 23 672Public sector entities 6 643 10 512 3 3 17 158 15 997Local governments and municipalities 245 6 038 1 060 1 060 7 343 5 623Sovereign 13 730 54 18 070 31 854 26 567Banks 36 060 1 455 37 515 36 913Securities firms 104 10 114 906Retail mortgages 4 113 432 108 958 4 474 11 447 124 883 123 621Retail revolving credit 8 802 8 802 64 8 866 7 028Retail – other 749 23 328 21 552 1 776 726 24 803 23 241SME – retail 91 5 16 280 2 995 13 285 16 376 20 340Securitisation exposure 557 229 229 786 229

RECONCiLiATiON OF ON-BALANCE SHEET ExpOSURE TO gROSS LO ANS AND ADvANCES

600 000

500 000

400 000

300 000

200 000

100 000

0

rm

HOME LOANS (R145 895m)

COMMERCIAL MORTGAGES (R86 100m)

PROPERTIES IN POSSESSION (R662m)

CREDIT CARDS (R7 910m)

OVERDRAFTS (R13 307m)

TERM LOANS (R74 605m)

OVERNIGHT LOANS (R12 552m)

OTHER LOANS TO CLIENTS (R42 897m)

LEASE AND INSTALMENT SALES (R67 881m)

PREFERENCE SHARES AND DEBENTuRES (R20 499m)

FACTORING ACCOuNTS (R3 202m)

DEPOSITS PLACED uNDER REVERSE PuRCHASE AGREEMENTS (R10 849m)

TRADE, OTHER BILLS AND BANKERS’ ACCEPTANCES (R140m)

Basel ii on-balance-sheet

exposureDerivatives

government stock and

other dated securities

short-term securities other Fair-value

adjustments

other assets net

of fair-value adjustments

setoff accounts

within iFrs gross loans and

advances

gross loans and advances

568 786 (14 526)(28 818)

(25 764)(2 705) (2 305) (4 915) (3 254) 486 499


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedbalanCe sheeT CredIT exposure** per basel II asseT Class and busIness ClusTer (continued)

Regulated

RmNedbank

Capital*NedbankCorporate*

TotalNedbank

Retail andBusinessBanking

NedbankRetail


NedbankWealth

CentralManage-

ment 20102009

(Restated)

The Standardised Approach (TSA) – 20 493 48 051 48 051 – 10 912 167 79 623 75 224

Corporate 2 932 159 159 129 3 220 4 368SME – corporate 10 007 3 047 3 047 13 054 13 634Public sector entities 32 32 30Local governments and municipalities 17 4 4 21 2 578Sovereign 1 450 1 239 2 689 1 198Banks 1 236 60 60 6 798 38 8 132 8 613Securities firms 313 313 307Retail mortgages 2 804 3 483 3 483 2 137 8 424 7 274Retail – other 1 523 37 710 37 710 738 39 971 33 409SME – retail 179 3 267 3 267 3 446 3 514Securitisation exposure 321 321 321 299

properties in possession – 5 639 631 8 18 – 662 887Non-regulated entities 21 096 11 393 4 938 4 530 408 470 (1 162) 36 735 34 473

Balance sheet exposure (Basel ii) 106 199 173 461 248 413 195 748 52 665 23 637 17 076 568 786 542 077

Less assets included in Basel II

asset classes (42 948) (11 515) (1 106) (843) (263) (6 661) (16 803) (79 033) (78 216)

Derivatives (14 419) (34) (60) (60) (1) (12) (14 526) (13 582)Government stock and other

dated securities (6 849) (3 899) (18 070) (28 818) (33 903)Short-term securities (20 204) (1 357) (4 203) (25 764) (18 213)Call money (1 057) (74) (132) (1 263) (929)Deposits with monetary

institutions (909) (656) 9 (1 556) (2 424)Remittances in transit 119 (5) (9) 4 114 108Fair-value adjustments (364) (1 844) (97) (12) (85) (2 305) (1 000) Other assets net of fair-value adjustments on assets 854 (3 770) (944) (762) (182) (2 325) 1 270 (4 915) (8 273)

Setoff of accounts within International Financial Reporting Standards (IFRS) total gross loans and advances – (2 873) (381) – (381) – – (3 254) (3 762)

Gross loans and advances 63 251 159 073 246 926 194 905 52 021 16 976 273 486 499 460 099

* Nedbank Corporate and Nedbank Capital include London Branch (AIRB Approach).

** Balance sheet exposure includes on-balance-sheet, repurchase and resale and derivative exposures.

87b

advanCed InTernal raTIngs-based approaCh For nedbank group Through Nedbank Limited and London Branch 87% of the total credit extended in Nedbank Group is covered by the Basel II AIRB

Approach, with the Imperial Bank, Fairbairn and Nedbank African subsidiaries’ credit portfolios on TSA. Nedbank intends to apply to

the SARB in 2011 for approval to use the AIRB approach for the legacy Imperial Bank book.

The results shown below include both the Nedbank Limited and London Branch exposure:

suMMary oF advanCed InTernal raTIngs-based approaChbasel II CredIT exposures by ClusTer and asseT Class

2010

rm

aIrb on-balance-

sheetexposure

aIrb off-balance-

sheetexposure

repurchase and resaleexposure

derivative exposure

Total credit

extended*

exposureat default

(ead)

downturnexpected

loss(perfor-

ming)

best estimate

of expected

loss (non-

performing)

Nedbank Capital 60 348 6 843 10 829 13 926 91 946 78 604 216 744

Corporate 18 312 522 1 163 4 650 24 647 24 699 189 744Specialised lending – commodities finance 67 67 69 Specialised lending – project finance 2 097 2 097 2 161 5 SME – corporate 241 390 631 710 4 Public sector entities 4 997 506 1 140 6 643 6 721 Local governments and municipalities 147 98 245 193 Sovereign 13 730 12 13 742 13 773 Banks 19 449 82 9 066 7 545 36 142 23 470 13 Securities firms 7 614 94 3 718 631 2 Retail mortgages 4 4 4Retail – other 740 9 749 749 2 SME – retail 91 91 111 1 Securitisation 557 5 613 6 170 5 313

Nedbank Corporate 141 570 58 186 – – 199 756 184 138 444 491

Corporate 71 123 49 485 120 608 106 034 263 25Specialised lending – high volatility commercial real estate 6 740 341 7 081 7 082 42 319Specialised lending – income producing real estate 41 567 1 805 43 372 44 634 113 67SME – corporate 4 066 782 4 848 4 776 24 80Public sector entities 10 512 3 314 13 826 12 999 1 Local governments and municipalities 6 038 480 6 518 6 545 1 Sovereign 54 54 55Banks 1 455 1 946 3 401 1 970 Securities firms 10 10 10 Retail mortgages 3 3 Retail – other SME – retail 5 30 35 33



2010

rm

aIrb on-balance-

sheetexposure

aIrb off-balance-

sheetexposure

repurchase and resaleexposure

derivative exposure

Total credit

extended*

exposureat default

(ead)

downturnexpected

loss(perfor-

ming)

best estimate

of expected

loss (non-

performing)

Total Nedbank Retail and Business Banking 194 785 57 023 – – 251 808 244 405 2 614 6 150

Corporate 6 403 3 162 9 565 8 316 40 60Specialised lending – income producing real estate 2 369 219 2 588 2 630 8 6SME – corporate 22 879 8 845 31 724 31 044 152 362Public sector entities 3 16 19 13 Local governments and municipalities 1 060 12 1 072 1 113 Retail mortgages 113 432 19 402 132 834 136 481 814 2 889Retail revolving credit 8 802 16 001 24 803 16 907 516 718 Retail – other 23 328 2 020 25 348 23 884 853 1 434SME – retail 16 280 7 346 23 626 23 788 231 681Securitisation 229 229 229

Nedbank Retail 142 536 37 368 – – 179 904 174 837 2 223 5 146

Corporate 222 222 222 6 Retail mortgages 108 958 18 050 127 008 130 860 780 2 778Retail revolving credit 8 802 16 001 24 803 16 907 516 718Retail – other 21 552 1 885 23 437 22 005 837 1 243SME – retail 2 995 1 210 4 205 4 614 84 407Securitisation 229 229 229

Nedbank Business Banking 52 249 19 655 – – 71 904 69 568 391 1 004

Corporate 6 403 2 940 9 343 8 094 34 60Specialised lending – income producing real estate 2 369 219 2 588 2 630 8 6SME – corporate 22 879 8 845 31 724 31 044 152 362Public sector entities 3 16 19 13 Local governments and municipalities 1 060 12 1 072 1 113 Retail mortgages 4 474 1 352 5 826 5 621 34 111Retail – other 1 776 135 1 911 1 879 16 191SME – retail 13 285 6 136 19 421 19 174 147 274

Nedbank Wealth 12 237 3 094 – – 15 331 16 988 39 76

Retail mortgages 11 447 2 789 14 236 15 549 31 74Retail revolving credit 64 221 285 563 3 1Retail – other 726 84 810 876 5 1

Central Management 18 071 – – – 18 071 18 071 – 20

Corporate 1 1 1 20Sovereign 18 070 18 070 18 070

Total 427 011 125 146 10 829 13 926 576 912 542 206 3 313 7 481

Downturn expected loss (AIRB Approach) 10 794IFRS impairment on loans and advances 9 062

Excess of downturn expected loss over eligible provisions 1 732

* Total credit extended is AIRB on-balance-sheet, repurchase and resale, derivatives and off-balance-sheet exposures (includes unutilised facilities).

89b

suMMary oF The sTandardIsed approaCh

basel II CredIT exposures by ClusTer and asseT Class

2010

rm

aIrb on-

balance-

sheet

exposure

aIrb off-

balance-

sheet

exposure

repurchase

and resale

exposure

derivative

exposure

Total credit

extended*

Nedbank Corporate 20 435 210 – 58 20 703

Corporate 2 904 28 2 932SME – corporate 10 007 210 10 217Public sector entities 32 32Local governments and municipalities 17 17Sovereign 1 450 1 450Banks 1 206 30 1 236Securities firms 313 313Retail mortgages 2 804 2 804Retail revolving creditRetail – other 1 523 1 523SME – retail 179 179

Nedbank Retail 47 991 835 – 60 48 886

Corporate 159 1 160SME – corporate 3 047 167 3 214Local governments and municipalities 4 4Banks 60 60Retail mortgages 3 483 436 3 919Retail – other 37 710 166 37 876SME – retail 3 267 65 3 332Securitisation exposure 321 321

Nedbank Wea lth 10 911 – – 1 10 912

CorporateSovereign 1 239 1 239Banks 6 797 1 6 798Securities firmsRetail mortgages 2 137 2 137Retail revolving creditRetail – other 738 738

Central Management 155 – – 12 167

Corporate 121 8 129Banks 34 4 38

Total 79 492 1 045 – 131 80 668

* Total credit extended is AIRB on-balance-sheet, repurchase and resale, derivatives and off-balance-sheet exposures (includes unutilised facilities).

The sTandardIsed approaChThe exposure under TSA, which consists of the legacy Imperial Bank book, Nedbank Group’s African subsidiaries and Fairbairn, is 13%

of Nedbank Group total exposure. A breakdown of exposures by asset class is shown in the table below:


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedIMpaIrMenTs and deFaulTed loans and advanCesThe credit loss ratio on the banking book improved to 1,36% for the period [2009: 1,52% (restated)]. The reduction in the impairment

charge was driven mostly by Nedbank Retail, particularly in the secured portfolios that had lagged the recovery in the unsecured

portfolios. Lower interest rates and the stabilising of job losses contributed to the retail credit loss ratio improving significantly

from 3,17% in 2009 to 2,67%. The group further strengthened its provisioning by reducing certain security assumptions in specific

impairments and lengthening the emergence periods.

The credit portfolios in Nedbank Corporate, Nedbank Business Banking and Nedbank Wealth are of high quality and credit loss ratios

remained within or below the respective clusters’ through-the-cycle target levels. Nedbank Capital impairments increased in the

higher risk private equity portfolio.

The tables on the following pages summarise Nedbank Group’s defaulted portfolio and the level of impairments. The policies, principles

and definitions relating to the defaulted portfolio and impairments are well articulated in the group’s credit policy and Pillar 3 Report.

suMMary oF IMpaIrMenTs, deFaulTed loans and advanCes and CredIT loss raTIos

2010

%nedbank

Capital nedbank

Corporate

nedbank retail and

business banking

nedbank retail

nedbank business banking

nedbank wealth Total

Impairments to gross loans and advances 1,45 0,86 3,58 3,88 2,42 0,63 2,30

Specific impairments 1,27 0,59 2,94 3,20 1,95 0,48 1,86Portfolio impairments 0,18 0,27 0,64 0,68 0,47 0,15 0,44

Impairment charge as a % of net interest income (NII) 44,55 9,29 45,82 55,66 8,64 6,17 37,26Credit loss ratio 1,27 0,20 2,18 2,67 0,40 0,15 1,36

Credit loss ratio – specific 1,17 0,27 2,08 2,46 0,71 0,16 1,32Credit loss ratio – portfolio 0,10 (0,07) 0,10 0,21 (0,31) (0,01) 0,04

Defaulted loans and advances to gross loans and advances 2,03 2,58 8,51 9,09 6,31 2,16 5,50Properties in possession to gross loans and advances – – 0,26 0,32 0,02 0,11 0,14

suMMary oF IMpaIrMenTs, deFaulTed loans and advanCes and CredIT loss raTIos

2009(Restated)*

%Nedbank

Capital Nedbank

Corporate

Total Nedbank

Retail and Business Banking

Nedbank Retail

Nedbank Business Banking

Nedbank Wealth Total

Impairments to gross loans and advances 0,69 0,82 3,39 3,66 2,38 0,81 2,13

Specific impairments 0,56 0,45 2,83 3,17 1,59 0,67 1,70Portfolio impairments 0,13 0,37 0,56 0,49 0,79 0,14 0,43

Impairment charge as a % of NII 11,19 11,09 52,10 65,50 10,12 19,43 40,68Credit loss ratio 0,36 0,25 2,56 3,17 0,52 0,47 1,52**

Credit loss ratio – specific 0,31 0,27 2,69 3,24 0,82 0,40 1,59Credit loss ratio – portfolio 0,05 (0,02) (0,13) (0,07) (0,30) 0,07 (0,07)

Defaulted loans and advances to gross loans and advances 1,41 2,37 9,39 10,47 5,45 2,15 5,88Properties in possession to gross loans and advances – – 0,37 0,47 0,02 0,03 0,19

* 2009 restated to include Imperial Bank and disclose Nedbank Wealth separately.

91b

Nedbank Group updated its methodology for calculating the credit loss ratio in 2010, removing trading assets from loans and advances. Impairments are not raised against trading assets as these are designated at fair value through profit or loss, and therefore any losses are realised through a decrease in non-interest revenue.

Additionally, Nedbank Group’s credit loss ratio is now based on a year-to-date daily average of loans and advances as opposed to a simple average. These changes had a minimal impact on Nedbank Group’s credit loss ratio (ie 0,03% – 0,06% over the past two years). The credit loss ratio at December 2009 increased from 1,47% to 1,52% after incorporating these changes**.

In 2009 (with the Retail Cluster following in 2010) Nedbank Group enhanced the consolidation, focus and reporting of key financial risk appetite metrics. Business cluster-specific credit loss ratio targets were formalised for the first time, after taking into account historic, through-the-cycle, sustainable performance as well as desired risk appetite. In addition to this, the group’s credit loss ratio target was reviewed separately, but in conjunction with the consolidated business cluster targets. Nedbank Group’s targeted credit

loss ratio is 0,60% – 1,00%.

The business clusters’ credit loss ratios over time are also shown below.

Note: Nedbank Corporate and Nedbank Retail credit loss ratios restated due to Imperial Bank integration.

BUSiNESS CLUSTERS’ CREDiT LOSS RATiO TRENDS

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

%

NEDBANK RETAIL

TOTAL RETAIL AND BuSINESS BANKING

NEDBANK CAPITAL

NEDBANK BuSINESS BANKING

NEDBANK WEALTH

NEDBANK CORPORATE

mar 2009 Jun 2009 sep 2009 Dec 2009 mar 2010 Jun 2010 sep 2010 Dec 2010

3,40

2,82

3,22

2,64

1,01

0,80 0,83

1,27

0,79

0,47

0,91

0,59

0,260,27 0,25 0,25 0,29 0,24

0,25 0,20

0,62

0,47 0,320,31

0,23 0,15

0,62

0,600,31 0,36

1,14

0,520,43

0,32 0,270,40

2,57 2,562,42 2,37

2,23 2,18

3,21 3,17

2,96 2,93

2,762,67

TREND OF CREDiT LOSS RATiO vERSUS TARgET RANgE

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

%

mar 2009 Jun 2009 sep 2009 Dec 2009 mar 2010 Jun 2010 sep 2010 Dec 2010

GROuP (CREDIT LOSS RATIO)

uPPER BOuND (GROuP CREDIT LOSS RATIO TARGET)

LOWER BOuND (GROuP CREDIT LOSS RATIO TARGET)

BASEL II EL % THROuGH-THE-CyCLE TARGET RANGE (0,6% - 0,7%)

old upper bound (group credit loss ratio target) 0,85

Basel ii expected loss (el)% through-the-cycle-range (0,6-0,7)

old lower bound (group credit loss ratio target) 0,55new lower bound (group credit loss ratio target) 0,60

new upper bound (group credit loss ratio target) 1,00

1,72

1,601,52 1,52 1,51

1,46

1,36 1,36


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedA summary of the impairments movements over the past year is shown below.

suMMary oF IMpaIrMenTs

RmNedbank

Capital NedbankCorporate

TotalNedbankRetail andBusinessBanking

NedbankRetail


NedbankWealth

CentralManage-

ment 2010 2009

Opening balance 384 1 200 8 060 6 840 1 220 156 (2) 9 798 7 859

Specific impairment 310 656 6 735 5 921 814 129 7 830 5 542

Specific impairment, excluding discounts 306 416 5 839 5 269 570 129 6 690 4 566Specific impairment for discounted cashflow losses 4 240 896 652 244 1 140 976

Portfolio impairment 74 544 1 325 919 406 27 (2) 1 968 2 317

Income statement impairment charge (net of recoveries) 535 307 5 320 5 110 210 25 1 6 188 6 634

Specific impairment 471 270 5 098 4 697 401 (38) 1 5 802 6 798Net increase/decrease in impairment for discounted cashflow losses 20 137 (30) (3) (27) 65 192 164Portfolio impairment 44 (100) 252 416 (164) (2) 194 (328)

Recoveries 167 71 490 458 32 35 – 763 457Amounts written off/other transfers (163) (209) (5 042) (4 836) (206) (109) – (5 523) (5 152)

Specific impairment (162) (202) (5 042) (4 836) (206) (109) (5 515) (5 131)Portfolio impairment (1) (7) (8) (21)

Closing balance 923 1 369 8 828 7 572 1 256 107 (1) 11 226 9 798

Specific impairment 806 932 7 251 6 237 1 014 82 1 9 072 7 830

Specific impairment, excluding discounts 782 555 6 385 5 588 797 17 1 7 740 6 690Specific impairment for discounted cashflow losses 24 377 866 649 217 65 1 332 1 140

Portfolio impairment 117 437 1 577 1 335 242 25 (2) 2 154 1 968

Total loans and advances 63 251 159 072 246 927 194 906 52 021 16 976 273 486 499 460 099

Total average banking book loans and advances 42 113 152 775 243 651 191 212 52 439 17 406 (1 840) 454 105 436 884

Total average loans and advances 64 025 152 775 243 651 191 212 52 439 17 406 (90) 477 767 451 853

93b

The coverage ratio is the amount of specific impairments that have been raised for the total defaulted loans and advances. This is

effectively the inverse of the expected recoveries ratio. The expected recoveries are equal to the defaulted loans and advances less the

specific impairments, as specific impairments are raised for any shortfall that would arise after all recoveries are taken into account.

The expected recoveries of defaulted loans and advances include recoveries as a result of liquidation of security or collateral, as well

as recoveries as a result of a client curing or partial client repayments.

The absolute value of expected recoveries of defaulted accounts (which includes security values) will increase as the number of

defaults increase. The expected recovery amount will, in most instances, be less than the total defaulted exposure, as it is seldom the

case that 100% of the defaulted loan would be written off.

A decrease in the coverage ratio (or increase in the expected recoveries ratio) may arise as a result of the following:

• Expected recoveries improving due to higher recoveries being realised in the loss given default (LGD) calculation.

• A change in the defaulted product mix, with a greater percentage of products that have a higher security value and therefore a

lower specific impairment, such as secured products (home loans and commercial real estate).

• An increase in the collateral value, which is an input into the LGD calculation and would result in a decrease in the LGD and

decrease in specific impairments.

• A change in the mix of new versus older defaults as, in most products, the recoveries expected from defaulted clients decrease over

time.

• A change in the writeoff policy, such as extending the period prior to writing off a deal, that will result in a longer period in which

recoveries can be realised.

Defaulted advances declined by 1,04% to R26 765 million (2009: R27 045 million). Total impairment provisions increased by 14,6% to

R11 226 million (2009: R9 798 million) resulting in strengthened coverage ratios. The group’s coverage ratio increased to 33,9% (2009:

29,0%) predominantly due to the decrease in residential mortgage defaulted advances. In addition, improved client affordability

combined with stabilising house prices has contributed towards the ongoing improvement of early arrears in home loan advances.

However, commercial mortgages, lease and instalment debtors, and other loans and advances increased, as illustrated in the following

table.

DEFAULTED LOANS AND ADvANCES, SpECiFiC iMpAiRMENTS AND COvERAgE RATiO

30 000

25 000

20 000

15 000

10 000

5 000

0

34,0

32,0

30,0

28,0

26,0

24,0

22,0

20,0

rm %

2009 2010

DEFAuLTED LOANS AND ADVANCES

SPECIFIC IMPAIRMENTS

COVERAGE RATIO (%)

27 045

29,0

33,926 765

7 8309 072



deFaulTed loans and advanCes and relaTed seCurITy and IMpaIrMenTs by busIness ClusTer and asseT Class

RmNedbank


Total

Nedbank

Retail and

Business

BankingNedbank

Retail


NedbankWealth 2010 2009

AiRB Approach 1 242 2 340 18 639 15 364 3 275 336 22 557 23 746

Corporate 1 216 52 263 263 1 531 468Specialised lending – high-volatility commercial real estate 1 664 1 664 1 647Specialised lending – income-producing real estate 531 43 43 574 962SME – corporate 93 1 273 1 273 1 366 940Sovereign 26 26 44Retail mortgages 12 760 12 205 555 333 13 093 15 137Retail revolving credit 747 747 2 749 483Retail – other 2 392 1 942 450 1 2 393 2 638SME – retail 1 161 470 691 1 161 1 427

TSA – 1 245 1 725 1 725 13 2 983 1 623

Corporate 7 7 7 42SME – corporate 1 245 205 205 1 450 595Retail mortgages 85 85 12 97 65Retail other 1 277 1 277 1 1 278 789SME – retail 151 151 151 132

Other regulated entities – 254 – – 254 152properties in possession – 5 639 631 8 18 662 887Non-regulated entities 45 264 – – 309 637

Total defaulted loans and advances 1 287 4 108 21 003 17 720 3 283 367 26 765 27 045

DEFAULTED LOANS AND ADvANCES BY pRODUCT

rm

OTHER LOANS AND ADVANCES

PROPERTIES IN POSSESSION

PERSONAL LOANS

CREDIT CARDS

LEASE AND INSTALMENT DEBTORS

COMMERCIAL MORTGAGES

RESIDENTIAL MORTGAGES

(12,6%)

13,4%

24,3%

2,8%6,1%

(25,4%)

31,9%

30 000

25 000

20 000

15 000

10 000

2009 2010

15 956 13 947

3 513 3 983

2 469

3 068

504

518

1 222

1 297

887

662

2 4943 290

27 04526 765

95b

The coverage ratio and expected recovery ratio by business cluster and by product is shown in detail in the table below.

suMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group

2010

rm

defaulted loans and advances


as % of total

expected

recoveries

net uncovered

position after

discoun-ting

Total specific impair-ments

specific impair-

ments on defaulted loans and advances

specific impair-

ments for discounted

cashflow losses

Coverage ratio (%)

expected recovery ratio (%)

Nedbank Capital 1 287 4,8 481 806 806 782 24 62,6 37,4

Other loans and advances 1 287 4,8 481 806 806 782 24 62,6 37,4

Nedbank Corporate 4 108 15,3 3 176 932 932 555 377 22,7 77,3

Residential mortgages 45 0,2 32 13 13 9 4 28,9 71,1Commercial mortgages 3 439 12,8 2 700 739 739 413 326 21,5 78,5Lease and instalment debtors 29 0,1 15 14 14 10 4 48,3 51,7Personal loans 19 0,1 8 11 11 10 1 57,9 42,1Properties in possession 5 5 100,0Other loans and advances 571 2,1 416 155 155 113 42 27,1 72,9

Total Nedbank Retail and Business Banking 21 003 78,5 13 752 7 251 7 251 6 385 866 34,5 65,5

Residential mortgages 13 557 50,7 10 531 3 026 3 026 2 666 360 22,3 77,7Commercial mortgages 544 2,1 420 124 124 54 70 22,8 77,2Lease and instalment debtors 3 038 11,4 1 193 1 845 1 845 1 748 97 60,7 39,3Credit cards 518 1,9 16 502 502 500 2 96,9 3,1Personal loans 1 278 4,8 490 788 788 495 293 61,7 38,3Properties in possession 639 2,3 580 59 59 59 9,2 90,8Other loans and advances 1 429 5,3 522 907 907 863 44 63,5 36,5

Nedbank Retail 17 720 66,3 11 483 6 237 6 237 5 588 649 35,2 64,8

Residential mortgages 12 224 45,7 9 441 2 783 2 783 2 502 281 22,8 77,2Commercial mortgages 124 0,5 67 57 57 50 7 46,0 54,0Lease and instalment debtors 2 364 8,9 832 1 532 1 532 1 471 61 64,8 35,2Credit cards 514 1,9 14 500 500 498 2 97,3 2,7Personal loans 1 278 4,8 490 788 788 495 293 61,7 38,3Properties in possession 631 2,3 572 59 59 59 9,4 90,6Other loans and advances 585 2,2 67 518 518 513 5 88,5 11,5

Nedbank Business Banking 3 283 12,2 2 269 1 014 1 014 797 217 30,9 69,1

Residential mortgages 1 333 5,0 1 090 243 243 164 79 18,2 81,8Commercial mortgages 420 1,6 353 67 67 4 63 16,0 84,0Lease and instalment debtors 674 2,5 361 313 313 277 36 46,4 53,6Credit cards 4 2 2 2 2 50,0 50,0Properties in possession 8 8 100,0Other loans and advances 844 3,1 455 389 389 350 39 46,1 53,9

Nedbank Wealth 367 1,4 285 82 82 17 65 22,3 77,7

Residential mortgages 345 1,3 271 74 74 9 65 21,4 78,6Lease and instalment debtors 1 1 100,0Properties in possession 18 0,1 13 5 5 5 27,8 72,2Other loans and advances 3 3 3 3 100,0

Central Management – – (1) 1 1 1 – – 100,0

Other loans and advances (1) 1 1 1 100,0


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedsuMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group (continued)

2010

rm



as % of total

expected recoveries

net uncovered

position after

discoun-ting


specific impair-


specific impair-


cashflow losses

Coverage ratio (%)

expected recovery ratio (%)

group 26 765 100,0 17 693 9 072 9 072 7 740 1 332 33,9 66,1

Residential mortgages 13 947 52,1 10 834 3 113 3 113 2 684 429 22,3 77,7Commercial mortgages 3 983 14,9 3 120 863 863 467 396 21,7 78,3Lease and instalment debtors 3 068 11,5 1 209 1 859 1 859 1 758 101 60,6 39,4Credit cards 518 1,9 16 502 502 500 2 96,9 3,1Personal loans 1 297 4,8 498 799 799 505 294 61,6 38,4Properties in possession 662 2,5 598 64 64 64 9,7 90,3Other loans and advances 3 290 12,3 1 418 1 872 1 872 1 762 110 56,9 43,1

suMMary oF IMpaIrMenTs and deFaulTed loans and advanCes – nedbank group

2009

Rm

Defaulted loans and advances

Defaulted loans and advances

as % of total

Expected recoveries

Net uncovered

position after

discoun-ting


Specific impair-


Specific impair-


cashflow losses

Coverage ratio (%)

Expected recovery ratio (%)

group 27 045 100,0 19 215 7 830 7 830 6 690 1 140 29,0 71,0

Residential mortgages 15 956 59,0 12 951 3 005 3 005 2 627 378 18,8 81,2Commercial mortgages 3 513 13,0 2 964 549 549 334 215 15,6 84,4Lease and instalment debtors 2 469 9,1 915 1 554 1 554 1 423 131 62,9 37,1Credit cards 504 1,9 1 503 503 499 4 99,8 0,2Personal loans 1 222 4,5 543 679 679 383 296 55,6 44,4Properties in possession 887 3,3 719 168 168 168 18,9 81,1Other loans and advances 2 494 9,2 1 122 1 372 1 372 1 256 116 55,0 45,0

properTIes In possessIon

RmNedbank


Total Nedbank Retail and Business Banking

NedbankRetail


NedbankWealth

Central Manage-

ment 2010 2009

Opening balance – 2 880 871 9 5 – 887 791Disposal/Writedowns/

Revaluations – (6) (607) (593) (14) (14) – (627) (580)Properties in possession

acquired during the period – 9 366 353 13 27 – 402 676

Closing balance – 5 639 631 8 18 – 662 887

unsold 5 468 462 6 17 490 565Sold awaiting transfer 171 169 2 1 172 322

97b

CounTerparTy CredIT rIskNedbank Group applies the Current Exposure Method (CEM) for Basel II counterparty credit risk. Economic capital calculations also

currently utilise the CEM results as input in the determination of credit economic capital.

over-The-CounTer (oTC) derIvaTIves For nedbank lIMITed and london branCh

OTC derivative products Notional value

gross positive fair value Notional value

Gross positive fair value

Rm 2010 2010 2009 2009

Credit default swaps 8 338 56 2 272 8

Embedded derivatives 3 720* 2Proprietary trading 4 618** 54 2 272 8

Equities 11 740 569 11 005 1 155Forex and gold 346 824 6 212 189 601 6 437Interest rates 419 210 7 234 358 738 5 470Other commodities 4 172 147 45 302Precious metals except gold 6 487 105 2 56

Total 796 771 14 323 561 663 13 428

* Credit default swaps embedded in credit linked notes issued by Nedbank Group whereby credit protection is purchased of R1 078 million or credit linked

notes purchased whereby credit protection is sold of R2 642 million.

** Proprietary trading positions through the purchase (R1 877 million) and sale (R2 741 million) of credit protection.

OTC derivative products

Rm

Gross positive fair

value

Current netting

benefits

Netted current credit

exposure (before

mitigation)Collateral

amount

Netted current credit

exposure (after

mitigation)Exposure at default value

Risk-weighted exposure

2010 14 323 6 983 9 052 368 8 766 11 718 4 428

2009 13 428 7 028 6 963 779 6 443 9 566 3 018

seCurITIes FInanCIng TransaCTIons (sFTs) For nedbank lIMITed and london branCh

SFTs

RmGross positive

fair value

Collateral value after

haircut

Netted current credit exposure

(after mitigation)Exposure at

default valueRisk-weighted

exposure

2010 Repurchase agreements 10 849 10 343 506 506 26Securities lending 8 738 9 715 1 237 1 237 89

Total 19 587 20 058 1 743 1 743 115

2009Repurchase agreements 8 026 7 557 469 469 40Securities lending 8 567 9 208 415 415 27

Total 16 593 16 765 884 884 67


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCredIT ConCenTraTIon rIsksIngle-naMe CredIT ConCenTraTIon rIskOf total group credit economic capital only 3,1% is attributable to the top 20 exposures, excluding banks and government exposure, and 1,4% to the top 20 banks’ exposure, highlighting that Nedbank Group does not have undue single-name credit concentration risk.

The group’s credit concentration risk measurement incorporates the asset size of obligors/borrowers into its calculation of credit economic capital. Single-name concentration is monitored at all credit committees, which includes the applicable regulatory and economic capital per exposure.

geographIC ConCenTraTIon rIskGiven that 95% of the group’s loans and advances originate in South Africa, geographic exposure risk is high. Practically, however, this concentration has proven positive for Nedbank

Group, given the global financial crisis, and reflects its focus on its area of core competence.

The direct exposure of Nedbank Group to the banking sectors of Portugal, Italy, Ireland, Greece and Spain (PIIGS) is monitored on an ongoing basis and is not material. The group holds no sovereign bonds issued by these countries. Direct lines to banks in Italy and Spain are restricted to systemically important banks.

A summary of Nedbank Group’s exposure to the PIIGS is provided below:

• Portugal – total exposure amounts to R20,65 million.• Italy – total exposure amounts to R2,44 billion.• Ireland – total exposure amounts to R21,22 million.• Greece – Nedbank Group has no exposure, nor lines to Greek

banks.• Spain – total exposure amounts to R8,28 million.

Note 1: 2009 restated due to the introduction of the sovereign industry segment in 2010.Note 2: The figures above represents the industry (%) split of Nedbank Group’s total exposure, including on-balance sheet, off-balance sheet and

derivatives based on the proprietary credit portfolio model used for credit economic capital measurement.

gEOgRApHiC CONCENTRATiON RiSK

SOuTH AFRICA

REST OF AFRICA

REST OF WORLD

2010

95%

2009

94%

3%2% 4%2%

iNDUSTRY CONCENTRATiON RiSK

RETAIL –MORTGAGES

RETAIL – OTHER

SOVEREIGN

BASIC INDuSTRIES

CyCLICAL GOODS

CyCLICAL SERVICES

FINANCE AND INSuRANCE

NON-CyCLICAL

OTHER

REAL ESTATE

RESOuRCES

2010 2009

10%

23%

15%3%

3%

7%

9%

7%

14%

7%2%11%

22%

15%4%

3%

6%

9%

6%

16%

6%2%

99b

Previously sovereign exposures, including local government

exposure, were considered part of the non-cyclical segment. In

2010 this was allocated into a standalone segment and restated

for 2009.

We conclude that credit concentration risk is adequately

measured, managed, controlled and ultimately capitalised. There

is no undue single-name concentration or sector concentrations.

While there is a concentration of Nedbank Group’s loans and

advances in South Africa, this has been positive for Nedbank

Group during the global financial crisis.

seCurITIsaTIon rIsk

Nedbank Group uses securitisation exclusively as a funding

diversification tool and to add flexibility in mitigating structural

liquidity risk. The group currently has three traditional

securitisation transactions:

• Synthesis Funding Limited (Synthesis), an asset-backed

commercial paper (ABCP) programme launched during 2004.

• Octane ABS 1 (Pty) Limited (Octane), a securitisation of

motor vehicle loans launched in July 2007.

• GreenHouse Funding (Pty) Limited, Series 1 (GreenHouse),

a residential mortgage-backed securitisation programme

launched in December 2007.

Nedbank Group also fulfils a number of secondary roles as

liquidity facility provider, swap provider and investor in third-

party securitisation transactions. All securitisation transactions

entered into thus far have involved the sale of the underlying

assets to the special-purpose vehicles. Nedbank Group has not

originated or participated in synthetic securitisations.

Nedbank Group complies with International Financial Reporting

Standards in recognising and accounting for securitisation

transactions. In particular, the assets transferred to the

GreenHouse and Octane securitisation vehicles continue to be

recognised and consolidated in the balance sheet of the group

and the respective securitisation vehicles are consolidated under

Nedbank Group for financial reporting purposes. Synthesis is

also consolidated into the group for financial reporting purposes.

Securitisations are treated as sales transactions (rather than

financing). The assets are sold to the special-purpose vehicles at

carrying value and no gains or losses are recognised.

Nedbank Group has not engaged in any new securitisation

transactions of its own assets in the period under review.

There have been no downgrades of any of the commercial paper

issued in Nedbank Group’s securitisation transactions and the

performance of the underlying portfolios of assets remains

acceptable.

asseTs seCurITIsed and reTaIned seCurITIsaTIon exposure

Transactionyear

initiatedRating agency

Transactiontype Asset type

Assets secur-itised

Assets out-

standing

Amountretained/

pur-chased*

Assets securi-

tised

Assets out-

standing

Amountretained/

pur-chased*

Rm 2010 2010 2010 2009 2009 2009

GreenHouse 2007Moody’s

and FitchTraditional

securitisation Retail mortgages 2 000 1 699 226 2 000 1 973 226

Octane 2007 FitchTraditional

securitisation Auto loans 2 000 607 312 2 000 1 454 312

Total 4 000 2 306 538 4 000 3 427 538

* This is the nominal amount of exposure and excludes accrued interest.

lIquIdITy FaCIlITIes provIded To nedbank’s abCp prograMMe

Trans-action

year initiated

Ratingagency

Transaction

type Asset typeProgramme

size

Commercialpaper

outstandingLiquidityfacilities

Commercialpaper

outstandingLiquidityfacilities

Rm 2010 2010 2009 2009

Synthesis 2004 Fitch

ABCP

programme

Asset-backed

securities,

corporate term

loans and bonds 15 000 5 006 5 009 5 820 5 824

Total 15 000 5 006 5 009 5 820 5 824


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedTradIng MarkeT rIsk

Most of Nedbank Group’s trading activity is executed in Nedbank

Capital. This includes market-making and the facilitation of

client business and proprietary trading in the commodity, equity,

credit, interest rate, and currency markets. Nedbank Capital

primarily focuses on client activities in these markets.

In addition to applying business judgement, management uses

a number of quantitative measures to manage the exposure to

trading market risk. These measures include:

• risk limits based on a portfolio measure of market risk

exposures referred to as value at risk (VaR), including expected

tail loss; and

• scenario analysis, stress tests and other analytical tools that

measure the potential effects on the trading revenue arising

in the event of various unexpected market events.

While VaR captures Nedbank Group’s exposure under normal

market conditions, sensitivity and stress-and-scenario analysis

(and in particular stress testing) are used to add insight into the

possible outcomes under abnormal market conditions.

TradIng MarkeT rIsk proFIleThe tables below reflect the VaR statistics for the Nedbank

Group trading book activities. The first table is for the period

January to December 2010 and the second table is for the period

January to December 2009.

group TradIng book value aT rIsk

Rm Historical VaR (99%, one-day VaR) by risk type

Risk categories Average Minimum* Maximum* year-end

2010Foreign exchange 2,2 0,6 6,7 3,9interest rate 9,0 3,9 14,9 6,2Equity 3,6 1,4 9,3 2,8Credit 2,8 0,8 4,0 4,0Commodity 0,7 0,0 1,5 0,2Diversification** (7,3) (6,2)

Total vaR exposure 11,0 6,1 18,3 11,0

2009Foreign exchange 4,1 1,0 10,3 3,7Interest rate 16,9 7,2 28,7 7,4Equity 6,3 2,5 13,3 3,8Credit 6,0 2,5 10,9 3,2Commodity 0,5 0,0 2,4 1,2Diversification** (12,5) (6,0)

Total VaR exposure 21,3 9,9 33,1 13,3

* The maximum and minimum VaR values reported for each of the different risk factors do not necessarily occur on the same day. As a result a diversification

number for the maximum and minimum values have been omitted from the table.

** Diversification benefit is the difference between the aggregate VaR and the sum of VaRs for the five risk categories. This benefit arises because the

simulated 99%/one-day loss for each of the five primary market risk categories occurs on different days.

Nedbank Group’s trading market risk exposure expressed as average daily VaR decreased by 48% from R21,3 million in 2009 to

R11 million in 2010. The economic and financial outlook in 2010 has remained uncertain against the backdrop of a fragile global

economic recovery and the near sovereign default in the Eurozone. This has negatively impacted the risk appetite in all the market

risk categories.

The following graph illustrates the daily VaR for the period January to December 2010. Nedbank Group remained within the approved

risk appetite and the VaR limits allocated by the board.

101b

value-aT- rIsk uTIlIsaTIon For 2010(99%, one-day vaR)

VaR is an important measurement tool and the performance of the model is regularly assessed. The approach to assessing whether the

model is performing adequately is known as backtesting, which is simply a historical test of the accuracy of the VaR model. To conduct

a backtest the bank reviews the actual daily VaR over a one-year period (on average 250 trading days) and compares the actual

daily trading revenue (including net interest but excluding commissions and primary revenue) with the VaR estimate and counts the

number of times the trading loss exceeds the VaR estimate.

Nedbank Group used a holding period of one day with a confidence level of 99%, and had no backtesting exceptions for 2010.

vAR UTiLiSATiON FOR 2010 (99%, ONE-DAY vAR)

20

15

10

5

0

var rm

Jan FeB mar apr may Jun Jul aug sep oCt nov DeC

ONE DAy VAR

AVERAGE VAR

vAR pROFiT AND LOSS FOR 2010rm

mar apr mayJan FeB Jun augJul sep oCt nov DeC

25

20

30

15

10

5

–

-5

-10

-15

-20

-30

-25

PROFIT AND LOSS

VAR


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe following histogram illustrates the distribution of daily revenue during 2010 for Nedbank Group’s trading businesses (including

net interest, commissions and primary revenue credited to Nedbank Group’s trading businesses). The distribution is skewed to the

profit side and the graph shows that trading revenue was realised on 215 days out of a total of 251 days in the period. The average

daily trading revenue generated was R6,03 million (2009: R6,7 million).

analysIs oF TradIng revenue For 2010

revIsIons To The basel II FraMeworkIn the Revisions to the Basel II Framework published by the Basel Committee in July 2009 a guideline for calculating stressed VaR

was provided. Stressed VaR is calculated using market data taken over a period through which the relevant market factors were

experiencing stress. Nedbank Group uses historical data from the period 26 March 2008 to 12 March 2009. This period captures

significant volatility in the SA market.

The information in the following table is the comparison of the VaR using three different calculations at 31 December 2010. The three

different calculations are historical VaR, extreme tail loss and stressed VaR. The extreme tail loss measures the expected losses in the

tail of the distribution and stressed VaR uses a volatile historical data period. A 99% confidence level and one-day holding period is

used for all the calculations.

CoMparIson oF TradIng value aT rIsk

rm historical var stressed var extreme tail loss2010 99% (one-day var) 99% (one-day var) 99% (one-day var)

Foreign exchange 3,9 19,5 5,3Interest rates 6,2 15,7 8,2Equities 2,8 3,5 3,7Credit 4,0 4,0 7,0Commodities 0,2 3,6 1,2Diversification (6,2) (23,9) (13,3)

Total vaR exposure 10,9 22,4 12,1

ANALYSiS OF TRADiNg REvENUE FOR 2010

num

ber

of t

radi

ng D

ays

trading income (rm)

<-3

5

-35

to -

30

-30

to -

25

-25

to -

20

-20

to -

15

-15

to -

10

-10

to -

5

-5 to

0

0 to

5

5 to

10

10 to

15

15 to

20

20 to

25

25 to

30

30 to

35

>35

40

50

60

70

80

90

30

20

0

10

103b

equITy rIsk (InvesTMenT rIsk) In The bankIng bookThe total equity portfolio for investment risk is R3 919 million (2009: R3 873 million). R2 897 million (2009: R2 947 million) is held

for capital gain, while the rest is mainly strategic investments.

Investments Publicly listed Privately held Total

Rm 2010 2009 2010 2009 2010 2009

Fair value disclosed in balance sheet

(excluding associates and joint ventures) 536 485 2 475 2 491 3 011 2 976Fair value disclosed in balance sheet

(including associates and joint ventures) 536 485 3 383 3 388 3 919 3 873

Equity investments held for capital gain are generally classified as fair value through profit and loss, with fair-value gains and losses

reported in non-interest revenue. Strategic investments are generally classified as ‘available for sale’, with fair-value gains and losses

recognised directly in equity.

equITy InvesTMenTs held For CapITal gaIn (prIvaTe equITy) reporTed In non-InTeresT revenue

Nedbank Group Nedbank Capital Nedbank Corporate

Rm 2010 2009 2010 2009 2010 2009


Total private equity 228 304 148 269 80 35

Realised 230 109 214 72 16 37unrealised (2) 195 (66) 197 64 (2)

Total private equity 228 304 148 269 80 35

operaTIonal rIskNedbank Group was granted approval in December 2010 from

the South African Reserve Bank for the use of the AMA, and now

calculates its operational risk regulatory capital requirements

using partial and hybrid AMA.

The AMA Operational Risk Management Framework was

approved by the board’s Group Risk and Capital Management

Committee. The AMA methodologies contained therein have

already been rolled out and embedded in the businesses,

including for the purposes of economic capital and the

International Capital Adequacy Assessment Process.

asseT and lIabIlITy ManageMenTlIquIdITy rIsk A portfolio of marketable and highly liquid assets, which could

be liquidated to meet unforeseen or unexpected funding

requirements, is maintained. The market liquidity by asset type

(and for a continuum of plausible stress scenarios) is considered

as part of the internal stress testing and scenario analysis

process.

The quantum of unencumbered assets available as collateral for

stress funding is measured and monitored on an ongoing basis.

Nedbank Group’s sources of quick liquidity available for stress

funding requirements amounted to R78,6 billion at year-end.

The following table reflects the composition of this portfolio.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuednedbank group’s sourCes oF quICk lIquIdITy

The tables below show the expected profile of cashflows under a contractual and business-as-usual (Bau) scenario:

nedbank group ConTraCTual lIquIdITy gap aT year-end

rm >3 months >6 months >1 year non-2010 <3 months <6 months <1 year <5 years >5 years determined Total

Cash and cash equivalents (including mandatory reserve deposits with central bank) 19 272 473 19 745 Other short-term securities 19 377 2 763 3 128 1 776 27 044 Derivative financial instruments 3 682 1 117 1 361 4 877 2 845 13 882 Government and other securities 352 1 260 5 655 18 335 6 222 31 824 Loans and advances 87 925 18 266 30 134 177 962 160 986 475 273 Other assets 5 911 35 039 40 950

Assets 136 519 23 406 40 278 202 950 170 053 35 512 608 718

Total equity 47 814 47 814 Derivative financial instruments 1 288 582 1 032 4 886 4 264 12 052 Amounts owed to depositors 342 941 49 403 56 765 39 102 2 229 490 440 Other liabilities 9 262 23 046 32 308 Long-term debt instruments 289 1 674 18 102 6 039 26 104

Liabilities and equity 353 780 51 659 57 797 62 090 12 532 70 860 608 718

Net liquidity gap (217 261) (28 253) (17 519) 140 860 157 521 (35 348) –

The contractual liquidity gap is adjusted with behavioural assumptions in order to determine the group’s Bau or anticipated liquidity

risk profile. These adjustments result largely in a lengthening of deposit cashflows, due to behavioural assumptions through which

contractually maturing short-term deposits have longer profiles under normal market conditions.

NEDBANK gROUp’S SOURCES OF qUiCK LiqUiDiTY

5%5%

11%

31%

14%

19%

12%

3%

CORPORATE AND LISTED EQuITIES

MARKETABLE SECuRITIES SuRPLuS LIQuID ASSETS, NOTES AND COINS

PRuDENTIAL LIQuID ASSETS

CASH RESERVES

OTHER BANK PAPER AND uNuTILISED BANK CREDIT LINES

PRICE SENSITIVE OVERNIGHT LOANS

OTHER

105b

nedbank group busIness-as-usual lIquIdITy gap aT year-end

rm >3 months >6 months >1 year non-2010 <3 months <6 months <1 year <5 years >5 years determined Total

Cash and cash equivalents

(including mandatory reserve

deposits with central bank) 19 745 19 745 Other short-term securities 19 377 2 763 3 128 1 776 27 044 Derivative financial instruments 3 682 1 117 1 361 4 877 2 845 13 882 Government and other

securities 31 824 31 824 Loans and advances 40 178 26 135 47 971 316 853 44 136 475 273 Other assets 40 950 40 950

Assets 63 237 30 015 52 460 323 506 98 550 40 950 608 718

Total equity 47 814 47 814 Derivative financial instruments 1 288 582 1 032 4 886 4 264 12 052 Amounts owed to depositors 84 383 58 945 76 375 269 565 1 172 490 440 Other liabilities 32 308 32 308 Long-term debt instruments 289 1 674 18 003 6 138 26 104

Liabilities and equity 85 960 61 201 77 407 292 454 11 574 80 122 608 718

Net liquidity gap (22 723) (31 186) (24 947) 31 052 86 976 (39 172) –

Note: BaU assumptions include rollover assumptions on term maturities. No management actions are assumed in terms of realising cash through the sale

of liquid assets or other marketable securities.

The additional disclosure below depicts the contractual and Bau liquidity mismatches in respect of Nedbank Limited, and highlights

the split of total deposits into stable and more volatile. Based on the behaviour of the bank’s clients, it is estimated that 82% of the

total deposit base is stable.

nedbank lIMITed ConTraCTual balanCe sheeT MIsMaTCh aT year-end

rm

2010 Total next day 2 to 7 days8 days to 1

month

More than 1month to 2

months

Contractual maturity of assets 549 968 52 542 6 485 34 856 15 858Loans and advances 423 576 33 601 1 256 17 609 7 657Trading, hedging and other investment instruments 72 145 2 991 5 144 13 098 5 275Other assets 54 247 15 950 85 4 149 2 926Contractual maturity of liabilities 549 968 203 926 17 540 44 889 27 072Stable deposits 372 076 175 277 8 306 30 060 21 020Volatile deposits 83 365 21 921 1 663 6 375 5 229

Trading and hedging instruments 54 035 6 728 7 571 8 454 823Other liabilities 40 492

On-balance-sheet contractual mismatch – (151 384) (11 055) (10 033) (11 214)Cumulative on-balance-sheet contractual mismatch – (151 384) (162 439) (172 472) (183 686)


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe Bau table below shows the expected liquidity mismatch under normal market conditions after taking into account the behavioural

attributes of Nedbank Limited’s stable deposits, savings and investment products:

nedbank lIMITed busIness-as-usual balanCe sheeT MIsMaTCh aT year end

2010

rm Total next day 2 to 7 days8 days to 1

month

More than 1month to 2

months

BaU maturity of assets 549 968 28 093 4 223 14 413 11 286Loans and advances 423 576 8 400 2 302 11 985 8 533Trading, hedging and other investment instruments 72 145 19 693 1 921 2 428 2 753Other assets 54 247BaU maturity of liabilities 549 968 18 258 10 906 28 946 14 981Stable deposits 372 076 1 042 1 627 5 577 10 832Volatile deposits 83 365 1 881 5 133 18 629 3 326Trading and hedging instruments 54 035 15 335 4 146 4 740 823Other liabilities 40 492

On-balance-sheet BaU mismatch – 9 835 (6 683) (14 533) (3 695)Cumulative on-balance-sheet BaU mismatch – 9 835 3 152 (11 381) (15 076)

As per the table above Nedbank Limited’s Bau inflows exceed outflows in the overnight-to-one-week time bucket, taking into

account behavioural assumptions, including rollover assumptions associated with term deals, but excluding Bau management actions.

As illustrated on the following page the Bau maturity mismatch has improved during 2010. In other words, under Bau conditions

Nedbank Group’s liquidity position is stronger in 2010 than in 2009. This has been achieved through a strategy of lengthening the

funding profile and managing the asset/liability composition from a behavioural perspective.

In terms of lengthening the funding profile the long-term funding ratio increased to 23% in 2010, compared with 18% in 2009.

Nedbank Group’s capital market issues of R6,2 billion, with 3, 5 and 10 year instruments having been issued, contributed to the

increase in the long-term funding ratio.

NEDBANK LiMiTED BEHAviOURAL LiqUiDiTY MiSMATCH AT YEAR-END*

next Day 2 to 7 Days 8 Days to 1 month 1 to 2 months 2 to 3 months 3 to 6 months

4

2

0

(2)

(4)

(6)

(8)

2010

2009%

* Expressed on total assets and based on maturity assumptions before rollovers and risk management.

107b

InTeresT raTe rIsk In The bankIng bookNedbank Group is exposed to interest rate risk in the banking

book (IRRBB) primarily because of the following:

• The bank writes a large quantum of prime-linked advances.

• Funding is prudently raised across the curve at fixed-term

deposit rates that reprice only on maturity.

• Three-month Johannesburg Interbank Agreed Rate (JIBAR)-

linked swaps and forward-rate agreements are typically used

in the risk management of term deposits and fixed-rate

advances.

• Short-term demand funding products reprice to different

short-end base rates.

• Certain non-repricing transactional deposit accounts are

non-rate-sensitive.

• The bank has a mismatch in net non-rate-sensitive balances,

including shareholders’ funds that do not reprice for interest

rate changes.

IRRBB comprises:

• Repricing risk (mismatch risk) – timing difference in the

maturity (for fixed rate) and repricing (for floating rate) of

bank assets, liabilities and off-balance-sheet positions.

• Reset or basis risk – imperfect correlation in the adjustment

of the rates earned and paid on different instruments with

otherwise similar repricing characteristics.

• yield curve risk – changes in the shape and slope of the yield

curve.

• Embedded optionality – the risk pertaining to interest-

related options embedded in bank products.

nedbank group – InTeresT raTe reprICIng gap aT year-end

2010

rm < 3 months >3 months<6 months

> 6 months <12 months > 1 year

non-rate-sensitive

Net repricing profile before hedging 67 201 (26 844) (19 982) 29 879 (50 254)Net repricing profile after hedging 39 376 746 1 952 8 180 (50 254)Cumulative repricing profile after hedging 39 376 40 122 42 074 50 254 –

At year-end the earnings-at-risk sensitivity of the group’s banking book for a 1% parallel reduction in interest rates was 1,38% of total

group equity (2009: 1,30%), well within the approved risk limit of 2,5%. This exposes the group to a decrease in net interest income

(NII) of approximately R660 million should interest rates fall by 1%, measured over a 12-month period.

NEDBANK gROUp iNTEREST RATE REpRiCiNg pROFiLE AT YEAR END

rm

< 3 months >3 months<6 months

>6 months<12 months

>1 year non-rate- sensitive

40 000

60 000

20 000

0

(20 000)

(40 000)

(60 000)

NET REPRICING PROFILE BEFORE HEDGING

NET REPRICING PROFILE AFTER HEDGING


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe level of interest rate sensitivity is managed in conjunction with credit impairment sensitivity and the group’s interest rate view,

and is benchmarked regularly against the peer group.

Nedbank Limited’s economic value of equity, measured for a 1% parallel decrease in interest rates, is a loss of R441 million at year-

end (2009: loss of R225 million).

The table below highlights the group’s and bank’s exposure to interest rate risk measured for normal and stressed interest rate changes:

exposure To InTeresT raTe rIsk

2010

rm notenedbank

limitedother group

companiesnedbank

group

Nii sensitivity 1 1% instantaneous decline in interest rates (562) (98) (660)2% instantaneous decline in interest rates (1 119) (200) (1 319)

Linear path space 2 Lognormal interest rate sensitivity (259) n/a* n/a*Absolute-return interest rate sensitivity** (1 315) n/a* n/a*

Basis interest rate risk sensitivity 3 0,25% narrowing of prime/call differential (215) (2) (217)

Economic value of equity sensitivity 4 1% instantaneous decline in interest rates (441) n/a* n/a*2% instantaneous decline in interest rates (909) n/a* n/a*

Nii sensitivity Instantaneous stress shock** 5 (3 447) n/a* n/a*Instantaneous stress shock modelled as a ramp** 6 (3 166) n/a* n/a*

* n/a: not modelled.

** Stressed interest rate changes.

Notes

1 Net interest income sensitivity, as currently modelled, exhibits very little convexity.

2 Linear path space is a stochastic method used to generate random interest rate paths. These paths are then modelled and a probabilistic impact

of interest rate changes on NII is derived. The ‘Lognormal interest rate sensitivity’ uses two years of interest rate movements to derive interest rate

volatility. The stress scenario ‘Absolute-return interest rate sensitivity’ is based on the volatility of interest rates over nine years.

3 Basis interest rate risk sensitivity is quantified using a narrowing in the prime/call interest rate differential of 0,25% and is an indication of the

sensitivity of the margin to a squeeze in short-term interest rates.

4 Economic value of equity sensitivity is calculated as the net present value of asset cashflows less the net present value of liability cashflows.

5 The instantaneous stress shock is derived from the principles espoused in the Basel Committee paper ‘Principles for the Management and Supervision

of Interest Rate Risk’. 1st and 99th percentile observed interest rate changes over a five-year period with a one-year holding period have been used.

6 The instantaneous stress shock modelled as a ramp uses the same interest rate shock as the instantaneous stress shock described above, but the rate

shock is phased in over a nine-month period.

ForeIgn CurrenCy TranslaTIon rIsk In The bankIng bookForeign currency translation risk arises as a result of Nedbank Group’s investments in foreign companies that have issued foreign

equity. This foreign equity is translated into rands for domestic reporting purposes, recording a profit where the rand exchange rate

has deteriorated and a loss where the rand exchange rate has strengthened between periods.

Foreign currency translation risk remains relatively low and is currently aligned with an appropriate offshore capital structure. Risk

limits are based on the expected level of currency-sensitive foreign capital. The exposure was approximately uSD267 million at year-

end (2009: uSD241 million).

109b

oFFshore CapITal splIT by FunCTIonal CurrenCy

$m uS dollar equivalent ($m) 2010 2009Equity Forex sensitive Non-forex-sensitive Total Total

uS dollar 121 121 121 108Pound sterling 122 122 122 113Swiss franc 16 16 16 13Malawi kwatcha 8 8 8 7Other 543 543 436

Total 267 267 543 810 677

Forex-sensITIve porTIon oF oFFshore CapITal

$m 2010 2009

Forex-sensitive portion of offshore capital 267 241

Limit 325 250

The total risk-weighted assets (RWA) for foreign entities

(R7,6 billion) relative to that for Nedbank Group (R323 billion)

is 2,3% at year-end. The effective average capitalisation rate

of the foreign-denominated business is 27% (2009: 26%). Any

foreign exchange rate movement will therefore have a limited

effect on Nedbank Group’s capital adequacy ratio (eg a 10%

appreciation in the rand will decrease the capital adequacy ratio

only by 0,02%).

InsuranCe rIskWithin Nedbank Group insurance risk encompasses underwriting

and product design risk.

Actuarial and statistical methodologies are used to price

insurance risk (eg morbidity, mortality, theft). underwriters align

clients with this pricing basis and respond to any anti-selection

by placing clients in substandard-risk pools, pricing this risk with

an additional risk premium, excluding certain claim events or

causes, or excluding clients from entering pools at all.

The failure to reinsure with acceptable-quality reinsurers (beyond

the level of risk appetite mandated by the board of directors)

for risks underwritten by the short-term insurance and/or life

assurance activities of the group, and also including catastrophe

insurance (ie more than one insurance claim on the group arising

from the same event), could lead to disproportionate losses

(reinsurance risk).

Insurance underwriting activities are predominantly undertaken

by Nedgroup Life Assurance Company Limited (Nedgroup

Life) and Nedgroup Insurance Company Limited (Nedgroup

Insurance) within the Nedbank Wealth Cluster.

Nedgroup Insurance is a short-term insurer that focuses

predominantly on homeowner’s insurance and limited vehicle-

related value-add products for the retail market.

Nedgroup Life offers credit life, simple-risk and savings solutions,

as well as a set of differentiated underwritten individual risk life

products supported by a wellness programme. A large part of

the book is derived from the provision of life cover linked to

Nedbank Group’s lending activities.

The group’s risk appetite for insurance risk is currently low,

reflected by its consumption of only 0,7% of total minimum

required group economic capital (refer page 117). The solvency

ratios are set out on page 115.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCapITal ManageMenTregulaTory CapITal adequaCynedbank group regulaTory CapITal adequaCy

Ongoing strong balance sheet management has further strengthened the group’s capital ratios, well above the group’s internal targets

in preparation for Basel III, to 10,1% (core Tier 1), 11,7% (Tier 1) and 15,0% (total) from 9,9%, 11,5% and 14,9% in 2009.

In the first quarter of 2010 the acquisition of the minority shareholding in Imperial Bank was settled in cash and, together with the

negative impact of its integration into Nedbank Limited in Q4 2010 on risk-weighted assets (RWA), and the impairment as intangible

assets, rather than being treated as fixed assets, of capitalised software development costs (previously only expected from 2013

onwards under the new Basel III requirements), resulted in an approximate 1,3% decrease in the group’s capital adequacy ratios.

However, this was offset by continuing capital and RWA optimisation, Nedbank Group’s manage-for-value strategic focus, retained

earnings and a 0,3% increase in capital from higher levels of take-up under the scrip dividend alternative in the second quarter.

Strong track record of RWA and capital optimisation

RiSK AND CApiTAL OpTiMiSATiON

10,5

10,0

9,5

9,0

8,5

8,0

450

400

350

300

250

200

150

100

50

Core Tier 1 (Dec 09)

Core Tier 1 (Dec 10)

Imperial Bank

acquisition

Intangibles Gross credit RWA

growth

Profits less deductions

Capital optimisation

9,9 (0,5)

(0,8)

(0,8)

(0,9) (10,1)

(0,2)

% Core tier 1 ratio (2010) rwa (2007 - 2010)rbn

Dec 2007 Dec 2010Gross RWA optimisation

Gross RWA growth

57

335324

(68)

(17)*

(29)-

(22)42

15

2008

2009

2010

NEDBANK gROUp REgULATORY CApiTAL ADEqUACY

16,0

14,0

12,0

10,0

8,0

6,0

4,0

2,0

0,0

%

DeC 2009

DeC 2010

11,7%11,5%

8,5 – 10,0

15,0%14,9%

11,5 – 13,0

10,1%9,9%

7,5 – 9,0

*15,3 *15,6

*14,8 *15,3

*13,5 *13,9

INTERNAL TARGET RANGES

* Surplus (Rbillion) above regulatory minima

PRO FORMA BASEL III AT 2010

Core tier 1 tier 1 total

Strong track record of RWA and capital optimisation

*R7,7 billion due to AMA

111b

In the light of the predominant focus on the core Tier 1 ratio by

Basel III and its future new requirements to ensure all classes of

capital instruments fully absorb losses at the point of non-viability

before taxpayers are exposed to loss, all to be phased-in over time,

Nedbank Group’s focus is firmly on its core Tier 1 ratio.

Due to the high total ratio of 15,0% the group called the Imperial

Bank Tier 2 bond (‘IPB2’) amounting to R500 million (without

replacing it) in December 2010 and the intention is likewise with

the R1,5 billion Nedbank Limited bond (‘Ned 5’) that is callable

in April 2011, subject to SARB approval.

The annual group ICAAP was completed and signed off by the

board in July 2010. SARB’s SREP of Nedbank Group’s ICAAP

concluded favourably in H2 2010, with no material issues raised.

Nedbank Limited’s regulatory capital ratios decreased year-

on-year, but still remain well above the internal target ranges,

due to the Imperial Bank acquisition and impact on RWA of its

integration, and impairment of capitalised software development

costs, which in aggregate had an impact of decreasing the bank’s

capital ratios by 2,4%, offset to a large degree by retained

earnings, and capital and RWA optimisation. Nedbank Limited’s

capital ratios are core Tier 1: 9,3% (2009: 9,6%), Tier 1: 11,1%

(2009: 11,7%) and total: 14,9% (2009: 15,6%).

All capital adequacy ratios remain well above the group’s target

ranges. This is deemed prudent in light of the uncertainty that

still remains with regard to Basel III. They include unappropriated

profits for the year to the extent that these are not expected to

be reversed and are expected to be appropriated subsequent to

the year-end.

The group’s leverage ratio is low at 13,8 times (2009: 14,4 times),

compared with international levels. Consolidation of entities

for regulatory purposes is performed in accordance with the

requirements of Basel II, the Banks Act and accompanying

regulations. Some differences exist in the basis of consolidation

for accounting and regulatory purposes. These include the

exclusion of certain accounting reserves [eg the foreign currency

translation (FCT) reserve, share-based payments (SBP) reserve

and available-for-sale (AFS) reserve], the deduction of insurance

entities and the exclusion of trusts that are consolidated in

terms of International Financial Reporting Standards (IFRS) but

are not subject to regulatory consolidation.

The FCT, SBP and AFS reserves that arise in the consolidation of

entities in terms of IFRS amounted to approximately R1 billion

at year end, and are excluded from qualifying regulatory capital.

Restrictions on the transfer of funds and regulatory capital within

the group are not material factors. These restrictions mainly relate

to those entities that operate in countries other than South Africa

where there are exchange control restrictions in place.

suMMary oF rwa (by rIsk Type and busIness ClusTer)

2010 Mix 2009 Mix(Restated)**

Rm % Rm %

Credit risk 246 793 76,3 246 099 75,4

Nedbank Capital 28 632 8,9 25 389 7,7Nedbank Corporate 76 794 23,7 76 569 23,5Nedbank Business Banking 37 005 11,4 33 616 10,3Nedbank Retail 97 483 30,1 102 468 31,4Nedbank Wealth 6 031 1,9 7 051 2,2Central Management 848 0,3 1 006 0,3

Equity risk 13 273 4,1 13 396 4,1Market risk 7 339 2,3 5 718 1,8Operational risk * 43 415 13,4 47 222 14,4Other assets 12 861 3,9 14 031 4,3

Total RWA 323 681 100,0 326 466 100,0

* 2009 based on The Standardised Approach (TSA), 2010 based on AMA.

** Restated to reflect full integration of Imperial Bank into Nedbank Limited.

Nedbank Group’s total RWA are marginally lower year-on-year. This is mainly due to credit RWA remaining flat on the back of low

levels of growth and capital related optimisation, and the decrease in operational risk RWA following the adoption of the AMA given

SARB approval in 2010.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedRisk methodologies and capital allocation

Nedbank Group received approval from SARB to use the AMA for operational risk (from 2010) and IMA for market trading risk (from

2011) for regulatory capital purposes, and now has approval for all the three major Pillar 1 risk types for Basel II, having received

approval for the AIRB Approach for credit risk on day-one implementation of Basel II in January 2008.

The regulatory capital approaches above now align with those already in use for economic capital and ICAAP.

suMMary oF rwa and CapITal adequaCy posITIon

Nedbank Group Nedbank Limited ***Risk Type

Rm 2010 2009 2010 2009

Credit risk 246 793 246 099 225 719 184 472

Credit portfolios subject to AIRB Approach 188 610 192 842 176 680 180 968

Corporate, sovereign, bank, SME 106 312 105 669 95 545 95 274 Residential mortgages 46 305 51 023 45 141 49 543 Qualifying revolving retail 8 489 7 385 8 490 7 386 Other retail 27 504 28 765 27 504 28 765

Credit portfolios subject to TSA 52 771 49 344 43 694

Corporate, sovereign, bank 17 645 19 534 12 111 Retail exposures 35 126 29 810 31 583

Counterparty credit risk (Current Exposure Method) 4 543 3 057 4 476 2 908Securitisation risk [Internal Ratings-based (IRB) Approach] 869 856 869 596

Equity risk (Market-based Simple Risk Weight Approach) 13 273 13 396 10 829 10 781

– Listed (300% risk weighting) 1 605 1 447 1 596 1 447 – unlisted (400% risk weighting) 11 668 11 949 9 233 9 334

Market risk (TSA****) 7 339 5 718 6 373 4 455Operational risk (2010: AMA; 2009: TSA) 43 415 47 222 35 693 39 025Other assets (100% risk weighting) 12 861 14 031 9 721 10 429

Total risk-weighted assets 323 681 326 466 288 335 249 162

Total minimum regulatory capital requirements* 34 481 35 097 31 034 27 560Total qualifying capital and reserves** 48 419 48 584 42 860 38 939

Total surplus capital over minimum requirements 13 938 13 487 11 826 11 379

Analysis of total surplus capital** Core Tier 1 15 603 15 296 11 571 10 816Tier 1 15 250 14 820 11 838 11 691Total 13 938 13 487 11 826 11 379

* Includes Basel II capital floor requirements.

** Includes unappropriated profits.

*** Nedbank Limited refers to the SA reporting entity in terms of Regulation 38 (BA700) of the SA banking regulations.

**** SARB approval received to change to IMA from 2011.

The integration of Imperial Bank increased Nedbank Limited’s RWA by R49 billion year-on-year, mainly in credit RWA. The introduction

of AMA resulted in lower operational risk RWA.

113b

suMMary oF qualIFyIng CapITal and reserves

Excluding unappropriated profits Nedbank Group Nedbank LimitedRm 2010 2009 2010 2009

Tier 1 capital (primary) 36 861 36 627 31 249 28 600

Core Tier 1 capital 31 549 31 389 25 937 23 365

Ordinary share capital 449 436 27 27 Ordinary share premium 15 522 13 728 14 434 14 434 Reserves 28 130 25 485 17 605 15 610 Minority interest: ordinary shareholders 153 1 849 Deductions (12 705) (10 109) (6 129) (6 706)

Impairments (10) (8) (720) (3 430)Goodwill (4 945) (4 981) (1 410) (1 126)Capitalised software development costs* (1 998) (1 936)Other intangibles* (544)Excess of expected loss over eligible provisions (50%) (866) (780) (869) (861)Unappropriated profits (1 217) (1 312) (942) (798)FCT reserves 20 (223) (9) (9)SBP reserves (949) (875) 557 206 Property revaluation reserves (1 146) (1 002) (747) (666)AFS reserves (98) (76) (9) (9)Capital held in insurance and financial entities (50%) (562) (489)Other regulatory differences (390) (363) (44) (13)

Non-core Tier 1 capital 5 312 5 238 5 312 5 235

Preference share capital and premium 3 560 3 486 3 560 3 483 Hybrid debt capital instruments 1 752 1 752 1 752 1 752

Tier 2 capital (secondary) 10 511 10 911 10 839 9 807

Long-term debt instruments 11 000 11 500 10 998 10 848 Revaluation reserves (50%) 573 501 374 333 Deductions (1 062) (1 090) (533) (1 374)

Capital held in insurance and financial entities (50%) (562) (489)Excess of expected loss over eligible provisions (50%) (866) (780) (869) (861)General allowance for credit impairment 410 212 380Other regulatory differences (44) (33) (44) (513)

Total 47 372 47 538 42 088 38 407

* Treated as an impairment rather than as fixed assets.

Including unappropriated profits Nedbank Group Nedbank LimitedRm 2010 2009 2010 2009

Core Tier 1 capital 32 596 32 435 26 709 23 897Tier 1 capital (primary) 37 908 37 673 32 021 29 132Total capital 48 419 48 584 42 860 38 939


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuednedbank group’s subordInaTed debT and non-Core TIer 1

Note: The subordinated debt is based on call dates not maturity.

dIvIdend CoverThe group has a dividend cover policy range of 2,25 to 2,75 covered by headline earnings per share, dividends per share for 2010

at 2,3 times. Historically the effective cover has been higher as a result of take-up under the scrip dividend alternative and the

reinvestment of dividend proceeds by black economic empowerment (BEE) shareholder trusts.

suMMary oF regulaTory CapITal adequaCy oF all bankIng subsIdIarIesA summary of all the group’s banking subsidiaries’ Basel II regulatory capital positions is provided below:

2010 2009

RWATotal capital

ratio RWATotal capital

ratio Bank Rm % Rm %

Nedbank Limited (including unappropriated profits) 288 335 14,9 249 162 15,6Nedbank Limited (excluding unappropriated profits) 288 335 14,6 249 162 15,4 Imperial Bank Limited 43 887 11,2Nedbank (Namibia) Limited 5 067 13,5 3 864 14,6Fairbairn Private Bank (IOM) Limited 1 729 18,2 2 327 15,9Fairbairn Private Bank Limited 1 400 14,7 1 697 14,2Nedbank (Swaziland) Limited 1 290 20,2 1 374 15,7Nedbank (Lesotho) Limited 984 20,6 905 18,8MBCA Bank Limited 761 15,3 571 15,2Nedbank (Malawi) Limited 232 22,8 98 50,1

In October 2010 Imperial Bank ceased to be a registered banking entity. It was integrated into Nedbank Limited by year-end. This

largely explains the significant increase in Nedbank Limited in RWA year-on-year.

The capitalisation of all these banking entities is deemed adequate, all have conservative risk profiles, and are managed and monitored

within the group’s Enterprisewide Risk Management Framework and ICAAP.

NEDBANK’S SUBORDiNATED DEBT AND NON-CORE TiER 1

3000

3500

2500

2000

1500

1000

500

0

IMPERIAL BANK – SuBORDINATED DEBT

SuBORDINATED DEBT

HyBRID DEBT

2011 2012 2013 2014 2015 2017 2018

115b

suMMary oF solvenCy oF InsuranCe subsIdIarIesIn South Africa the regulators currently require the insurers to hold capital at a minimum of one times cover. The new SAM requirements

(South Africa’s version of Solvency II) are expected to be implemented in 2014 with revised measurements, similar to Basel II.

solvenCy raTIos Minimum 2010 2009

Long-term insurance (Nedgroup Life) 1,00 x 4,00 x 3,60 x Short-term insurance (Nedgroup Insurance Company) 1,25 x 1,38 x* 1,56 x*

* The decrease in the solvency ratio is the result of the timing of a dividend payment made of R140 million during October 2010 (2009: R30 million).

eConoMIC CapITal adequaCy and ICaapNedbank Group’s economic capital methodology is contained in the group’s Pillar 3 report. Set out below is a summary of the group’s

economic capital adequacy and ICAAP position.

group eConoMIC CapITal adequaCy

All risk and balance sheet methodologies and models are reviewed regularly to ensure they remain in line with best industry practice

and regulatory developments.

As previously advised, enhancements relating to capital allocation to business clusters were implemented in 2010. One major effect

of these adjustments has been to allocate most of the surplus capital held at group to the business clusters. This has been done and

the comparative results for the business clusters restated.

The key capital allocation enhancements implemented in 2010 were:

• Increase of the group’s internal target solvency standard from 99,9% (or A-) to 99,93% (or A) (implemented in 2009).

• update of the credit portfolio modelling correlations and revision of the credit economic capital allocation methodology, taking

into account recent global developments and experience, current best practice and Basel III.

• Change in internal measurement of operational risk for economic capital purposes using AMA.

• Incorporation of 100% of Imperial Bank.

• Implementing refined parameters used in the business risk methodology based on more recent data.

• Adding a new risk type for insurance risk.

gROUp ECONOMiC CApiTAL ADEqUACY

2010 2009

25 000

30 000

35 000

40 000

45 000

20 000

15 000

5000

10 000

rm

surplus 12 784

10% buffer 2 670

minimum requirement

26 703

Required economic capital

Required economic capital

Available financial resources

Available financial resources

minimum requirement

25 738

tier a (core capital)

36 845

tier B (non-core capital)

5 312tier B

(non-core capital) 5 238

tier a (core capital)

34 909

surplus 11 835

10% buffer 2 574


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinued• Increasing the aggregate amount allocated to business clusters using bottomup calculated economic capital via the allocation of

a capital buffer and thus aligning the clusters’ aggregated allocated capital closely with group regulatory capital levels (limited to

an effective 10% core Tier 1 regulatory ratio level for the group), on which its ROE is based.

The above had no impact on the group’s overall capital level, but significantly increased the quantum of capital allocated to each

business cluster and impacted the ROE recorded by the clusters on a steady-state basis.

Nedbank Group’s ICAAP confirms that the group is capitalised above its current A or 99,93% target debt rating (solvency standard)

in terms of its proprietary economic capital methodology. This includes a 10% capital buffer, the incorporation of the group’s risk

appetite as approved by the board and the application of comprehensive stress and scenario testing.

eConoMIC CapITal requIreMenTs (by rIsk Type) and avaIlable FInanCIal resourCes

Rm 2010 2009*

Credit risk 15 488 15 414Securitisation risk 18 26Transfer risk 89 146Market risk 3 340 3 255

Trading risk 424 442 Interest rate risk in the banking book (IRRBB) 27 39 Property risk 1 436 1 161 Investment risk 1 421 1 580 Forex translation risk 32 33

Business risk 4 715 4 157Operational risk 1 997 1 968Other assets risk 864 622insurance risk 192 150

Minimum economic capital requirement 26 703 25 738+ Capital buffer (10%) 2 670 2 574

= TOTAL economic capital requirement 29 373 28 312vs Available financial resources 42 157 40 147

Tier A capital (shareholders’ equity) 36 845 34 909 Tier B capital (non-core Tier 1-type capital) 5 312 5 238

= Surplus available after capital buffer 12 784 11 835

* Imperial Bank is included at 100% ownership for economic capital purposes retrospectively to 2009. Results shown incorporate the enhancements made

to the economic capital model for 2010.

117b

avaIlable FInanCIal resourCes

Rm 2010 2009

Tier A capital 36 845 34 909 Ordinary share capital and premium 15 971 14 164 Minority interest: ordinary shareholders 153 1 849 Reserves 28 130 25 485

Retained income 16 924 14 130 Unappropriated profits 1 217 1 309 Distributable reserves 7 692 7 697 Non-distributable reserves 124 173 FCT reserves (20) 223 SBP reserves 949 875 AFS reserves 98 76 Property revaluation reserves 1 146 1 002

Deductions (9 225) (7 827)

Impairments (10) (8)Capitalised software development costs (1 998) Other intangibles (544) Goodwill (4 945) (4 981)Subordinated-debt portion of unappropriated profits (170) (266)First loss credit enhancement in respect of securitisation scheme (100%)* (88) (33)Capital held in insurance and financial entities (100%)* (1 124) (489)Other adjustments (346) (2 050)

Excess of IFRS provisions over expected loss (100%) 1 816 1 238 Tier B capital 5 312 5 238

Preference shares 3 560 3 486 Hybrid debt capital instruments 1 752 1 752

Total AFR 42 157 40 147

* 100% deduction in 2010 to align with Basel III changes

ECONOMiC CApiTAL REqUiREMENTS (BY RiSK TYpE)

2010 2009CREDIT RISK

SECuRITISATION RISK

TRANSFER RISK

TRADING RISK

IRRBB RISK

PROPERTy RISK

INVESTMENT RISK

FOREX TRANSLATION RISK

BuSINESS RISK

OPERATIONAL RISK

OTHER ASSETS RISK

INSuRANCE RISK

17.7%

7.5%

5.3%

5.4%0.1%

1.6%

0.1%

3.2% 0.7%

58,0%

16.2%

7.6%

6.1%

4.5%

1.7%0.6% 0.1%

0.2%

0.1%

2.4% 0.6%

59,9%

0.3% 0.1%


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedThe total economic capital (including a 10% buffer) increased by R1,1 billion from R28,3 billion in 2009 (restated) to R29,4 billion

in 2010, largely due to an increase in business risk economic capital. The introduction of an economic risk type for insurance risk had

a small impact on total economic capital of R192 million (2009: R150 million), which is reflective of the low risk appetite in this

business sector.

The decrease in other adjustments for AFR is largely due to the purchase of Imperial Bank (minority interest).

In conclusion, Nedbank Group’s economic capital adequacy is strong at its A (99,93%) target debt rating (solvency standard), with a

surplus at group level of R12,8 billion. This is after the implementation of the enhancements previously mentioned and providing for

a 10% economic capital buffer, the adequacy of which is confirmed by sophisticated stress testing.

rIsk-based CapITal alloCaTIon To busIness ClusTersRisk-based economic capital allocation to the business clusters has been in place since 2008 for risk-adjusted performance

measurement and remuneration purposes. It is a fundamental component in the measurement of the businesses’ contribution to

economic profit, return on risk-adjusted capital and risk-adjusted return on capital.

As discussed on page 75, further enhancements have been made in 2010 to the group’s methodology for allocating capital to

its businesses. Overall this resulted in additional capital being allocated to each cluster, the main component of which was the

introduction of a capital buffer, aligning total allocated capital more closely with total equity upon which the group is measured.

Further refinements to the 2011 allocation methodology have been finalised as part of the 2011 to 2013 business planning process,

and will be communicated with the 2011 half-year results.

A summary of the economic capital allocation at 2010 by business cluster is presented below. The key movements in 2010 were the

allocation of higher economic capital buffers and an increase in business risk economic capital requirements.

suMMary oF MInIMuM eConoMIC CapITal requIreMenT aT 2010 (by busIness ClusTer)

2010

rmnedbank

groupnedbank

Capitalnedbank

Corporate


and retailnedbank

retail


nedbank wealth

Central Manage-

ment

Credit risk 15 488 1 239 3 194 10 552 8 961 1 591 492 11 Securitisation risk 18 18 Transfer risk 89 66 23 Market risk 3 340 1 161 532 235 229 6 83 1 329

Trading risk 424 424 IRRBB risk 27 2 6 18 15 3 1 Property risk 1 436 38 212 209 3 10 1 176 Investment risk 1 421 721 483 5 5 61 151 FX translation risk 32 14 5 11 2

Business risk 4 715 711 835 2 910 2 412 498 259 Operational risk 1 997 546 504 799 596 203 85 63 Other assets risk 864 32 93 191 184 7 57 491 Insurance risk 192 192

Minimum economic

capital requirement 26 703 3 773 5 181 14 687 12 382 2 305 1 168 1 894

Capital buffer * 17 398 1 342 2 109 6 683 5 715 968 314 6 950

Total capital

allocated 44 101 5 115 7 290 21 370 18 097 3 273 1 482 8 844

* Unallocated buffer included in Central Management buffer.

119b

suMMary oF MInIMuM eConoMIC CapITal requIreMenT aT 2009 (by busIness ClusTer)

2009

RmNedbank

GroupNedbank

CapitalNedbank

Corporate


and RetailNedbank

Retail


Nedbank Wealth

Central Manage–

ment

Credit risk 15 414 1 051 3 544 10 240 8 556 1 684 549 30 Securitisation risk 26 21 – 5 5 – – – Transfer risk 146 103 43 – – – – – Market risk 3 255 1 299 613 298 290 8 90 955

Trading risk 442 442 IRRBB risk 39 3 11 23 18 5 2 Property risk 1 161 37 270 267 3 1 853 Investment risk 1 580 842 561 5 5 72 100 FX translation risk 33 12 4 15 2

Business risk 4 157 663 793 2 502 1 821 681 181 18 Operational risk 1 968 535 506 801 603 198 56 70 Other assets risk 622 19 52 193 190 3 26 332 Insurance risk 150 – – – – – 150 –

Minimum economic

capital requirement 25 738 3 691 5 551 14 039 11 465 2 574 1 052 1 405

Capital buffer * 13 911 1 065 1 814 5 361 4 602 759 315 5 356

Total capital allocated 39 649 4 756 7 365 19 400 16 067 3 333 1 367 6 761

* Unallocated buffer included in Central Management buffer.


RiSK AND BALANCE SHEET MANAgEMENT REviEWcontinuedCosT oF equITyFollowing a shift in the constituents of the cost of equity calculated using the Capital Asset Pricing Model, Nedbank Group revised its

cost of equity to 13,00% at the beginning of 2011 (2010: 14,15%). The risk-free rate applied was the primary driver of this change

with the 10-year point of the SA sovereign yield curve declining to 8,16% (2009: 9,17%) at 31 December 2010. The cost of equity is

revised and updated on an annual basis but also reviewed quarterly.

exTernal CredIT raTIngsMoody’s investors Service

Moody’s Investors Service (Moody’s) has reaffirmed the ratings of Nedbank Limited, the 100%-owned subsidiary of Nedbank Group

Limited (Nedbank Group) in July 2010:

Moody’s InvesTors servICe nedbank lIMITed July 2010

Bank financial-strength rating C-

Outlook – financial-strength rating Stable

Global local currency – long-term deposits A2

Global local currency – short-term deposits Prime-1

Foreign currency – long-term bank deposits A3

Foreign currency – short-term bank deposits Prime-2

Outlook – foreign currency deposit rating Stable

National scale rating – long-term deposits Aa2.za

National scale rating – short-term deposits Prime-1.za

Outlook – national scale rating Stable

121b

FITCh raTIngsFitch Ratings (Fitch) affirmed its ratings for Nedbank Group and Nedbank Limited, below is a full list of the ratings the related outlook

at July 2010.

Latest Fitch ratings for Nedbank Group companies:

FiTCH RATiNgS NEDBANK gROUp NEDBANK LiMiTEDJuly 2010 July 2010

Individual C CSupport 2 2Foreign currencyShort-term F2 F2Long-term BBB BBBLong-term rating outlook Stable StableLocal currencyLong-term senior BBB BBBLong-term rating outlook Stable StableNationalShort-term F1+ (zaf) F1+ (zaf)Long-term AA- (zaf) AA- (zaf)Long-term rating outlook Stable Stable


SUMMARiSED dti CODES SCORECARDAT 31 DECEMBER 2010

Ownership

Voting rights Economic interest Employee

schemes/

broad-based

schemes, etc

Net equity

value Total score Weighting

Black

People

Black

Women

Black

People

Black

Women

Designated

Groups

30,71% 3,25% 28,05% 3,84% 11,33% 11,33% 30,71% 20,11% 20%

non-scoring performance Weighting

Product/Area

Mzanzi

(accounts)

FSC

(branches)

Black

SMMES

(R million)

Black

agriculture

(R million)

Affordable

housing

(R million)

Trans-

formational

Infrastructure

(R million)

BEE

transaction

financing

(R million)

Consumer

education

(% of Retail

NPAT)

Achieved 315 024 8 R1 772 R70 R2 099 R5 681 R6 570 0,27%

Growth vs 2009 1,00% 0,00% 52,54% 71,43% 63,84% 59,18% 79,27% 18,52%

Total BEE Score dti level 2 89,50% 100%

Management Board

Black Executive

Directors

Senior top

management

Top other

management

Bonus:

independent

directors Total score Weighting

47,06% 41,67% 25,00% n/a 50,00% 8,62% 10%

Employment Equity Senior management Middle management

Junior

management Disabled as % of total Total score Weighting

26,15% 50,85% 72,40% 1,15% 11,42% 15%

Skills Development Skills spend Disabled skills spend Category B, C, D black learners Total score Weighting

2,78% 0,04% 3,02% 9,60% 15%

preferential procurement % spend

% spend on QSE’s and

EME’s % spend black owned

% black women-

owned Total score Weighting

85,12% 27,13% 12,56% 5,24% 19,75% 20%

Enterprise Development Contributions Total score Weighting

6,98% 15,00% 15%

Social Economic Development Contributions Total score Weighting

1,46% 5,00% 5%

123b

MARKET SHARE

40%

30%

20%

10%

0%

-10%

-20%

-30%

4.0%

3.0%

2.0%

1.0%

0.0%

-1.0%

-2.0%

-3.0%

COMMERCIAL MORTGAGES

Change in market share Nedbank

Growth (%) Nedbank Ltd

Growth (%) Industry

Market share (%) Nedbank Ltd

Jan 2009 Mar 2009 May 2009 Jul 2009 Sep 2009 Nov 2009 Jan 2010 Mar 2010 May 2010 Jul 2010 Sep 2010 Nov 2010


RESIDENTIAL MORTGAGES

20%

10%

0%

-10%

-20%

1.0%

0.0%

-1.0%



Growth (%) Total Banking Institutions



MARKET SHAREcontinued

25%

20%

15%

10%

5%

0%

-5%

-10%

1.4%

0.9%

0.4%

-0.1%

-0.6%

INSTALMENT CREDIT



Growth (%) Industry



CREDIT CARDS

30%

20%

10%

0%

-10%

0.0%

-0.5%

-1.0%



Growth (%) Industry



125b

OTHER LOANS AND ADVANCES

30%

20%

10%

0%

-10%

1.0%

0.0%

-1.0%

-2.0%

-3.0%



Growth (%) Industry



TOTAL ADVANCES

30%

20%

10%

0%

-10%

2.0%

1.0%

0.0%

-1.0%

-2.0%



Growth (%) Industry




MARKET SHAREcontinued

TOTAL ASSETS

20%

10%

0%

-10%

-20%

1.0%

0.0%

-1.0%

-2.0%



Growth (%) Industry



TOTAL MORTGAGE ADVANCES

30%

20%

10%

0%

-10%

3%

2%

1%

0%

-1%



Growth (%) Industry



127b

TOTAL ASSETS

20%

10%

0%

-10%

-20%

1.0%

0.0%

-1.0%

-2.0%



Growth (%) Industry



TOTAL MORTGAGE ADVANCES

30%

20%

10%

0%

-10%

3%

2%

1%

0%

-1%



Growth (%) Industry



DEPOSITS

40%

20%

0%

-20%

-40%

1.0%

0.0%

-1.0%

-2.0%



Growth (%) Industry




MARKET SHARE PERCENTAGES

45%

40%

35%

30%

25%

20%

15%

10%

5%

Commercial Mortgages

Other Loans & Advances

Instalment Credit

Residential Mortgages

Credit Cards

Total Advances


DEFiNiTiONSadvanCed InTernal raTIng-based approaCh (aIrb)Advanced Internal Rating Based Approach, which is subject to Supervisory approval where a bank may use its internal developed credit

risk measurement systems to calculate the capital requirements for credit risk.

advanCed MeasureMenT approaCh (aMa)AMA allows a bank to calculate its regulatory capital charge (using internal models) based on internal risk variables and profiles. This

is the only risk sensitive approach for operational risk allowed in Basel II.

asseTs under ManageMenTAssets managed by Nedbank Group, which are beneficially owned by clients and are therefore not reported on the consolidated

balance sheet. Advances that have either been fully or partially utilised by a borrower.

aTMAutomated teller machine. A cash machine or free-standing device dispensing cash, which may also provide other information or

services to clients who have a card and a personal identification number, password or other personal identification.

banksThis asset class covers all exposures to counterparties treated as Banks

basel CapITal aCCord (basel II)The new Basel Capital Accord (Basel II) of the Bank for International Settlements is an improved capital adequacy framework

accomplished by closely aligning banks’ capital requirements with improved modern risk management practices and sophisticated risk

assessment capabilities. It further ensures the risk sensitivity of the minimum capital requirements by including supervisory reviews

and market discipline through enhanced disclosure.

basel asseT Classes (as CaTegorIsed In The ba 200 reTurn)CorporaTe exposuresCorporaTeCorporate exposures are defined as a debt obligation of a corporation, partnership, or proprietorship. Banks are permitted to distinguish

separately exposures to Small and Medium-sized enterprises.

speCIalIsed lendIng hIgh volaTIlITy CoMMerCIal real esTaTeHigh volatility commercial real estate (HVCRE) lending is the financing of commercial real estate that exhibits higher loss rate

volatility compared to other types of Specialised Lending.

speCIalIsed lendIng InCoMe-produCIng real esTaTeIncome-producing real estate (IPRE) refers to a method of providing funding to real estate (such as, office buildings to let, retail space,

multifamily residential buildings, industrial or warehouse space, and hotels) where the prospects for repayment and recovery on the

exposure depend primarily on the cash flows generated by the asset. The primary source of these cash flows would generally be lease

or rental payments or the sale of the asset.

speCIalIsed lendIng objeCT FInanCeObject finance (OF) refers to a method of funding the acquisition of physical assets (e.g. ships, aircraft, satellites, railcars, and fleets)

where the repayment of the exposure is dependent on the cash flows generated by the specific assets that have been financed and

pledged.

speCIalIsed lendIng CoMModITIes FInanCeCommodities finance (CF) refers to structured short-term lending to finance reserves, inventories, or receivables of exchange-traded

commodities (e.g. crude oil, metals, or crops), where the exposure will be repaid from the proceeds of the sale of the commodity.

speCIalIsed lendIng projeCT FInanCeProject finance (PF) is a method of funding in which the lender looks primarily to the revenues generated by a single project, both

as the source of repayment and as security for the exposure. This type of financing is usually for large, complex and expensive

installations, for example power plants, chemical processing plants, mines, etc.

129b

sMe CorporaTeThis asset class covers all exposures to Small and Medium Enterprises that are classified as Corporate, based on criteria prescribed by

the Regulator.

purChased reCeIvables CorporaTeThis asset class covers all receivables classified as corporate exposures, which are purchased for inclusion in asset-backed securitisation

structures, but banks may also use this approach, with the approval of national supervisors, for appropriate on-balance sheet exposures

that share the same features.

publIC seCTor enTITIesThis asset class covers all exposures to Enterprises that are wholly or majority owned by the Central Government, e.g. Eskom,

Transnet, etc.

loCal governMenTs and MunICIpalITIesThis asset class covers all exposures to metropolitan councils, district councils and municipalities.

sovereIgn (InCludIng CenTral governMenT and CenTral bank)This asset class covers all exposures to counterparties treated as Central Government.

seCurITIes FIrMsThis asset class covers all exposures to enterprises regulated by a recognised authority, and which trades in securities.

reTaIl exposuresreTaIl MorTgages (InCludIng hoMe equITy lIne oF CredIT) This asset class covers all mortgage advances or credit lines to individuals, which are fully secured by a mortgage over residential

property.

reTaIl revolvIng CredITExposures to individuals, that is revolving, unsecured, and committed (both contractually and in practice). In this context, revolving

exposures are defined as those where customers’ outstanding balances are permitted to fluctuate based on their decisions to borrow

and repay, up to a limit established by the bank.

reTaIl oTherThis asset class covers all non-revolving exposures (excluding mortgage advances) to individuals.

sMe reTaIlThis asset class covers all exposures to Small and Medium Enterprises that are classified as Retail, based on criteria prescribed by the

Regulator.

purChased reCeIvables – reTaIlThis asset class covers all receivables classified as retail exposures, which are purchased for inclusion in asset-backed securitisation

structures, but banks may also use this approach, with the approval of national supervisors, for appropriate on-balance sheet exposures

that share the same features.

bee TransaCTIonNedbank Group’s BEE transaction, which focused primarily on the issuing of shares to BEE partners for the purposes of BBBEE,

equating to approximately 9,3% (43 618 748 shares) of total share capital and equating to black ownership of 11,5% of the value

of Nedbank Group’s South African businesses in 2005. Nedbank Namibia’s BEE transaction, which focused primarily on the issuing

of shares to BEE partners and affinity groups for the purposes of BEE in Namibia, equating to approximately 0,14% (665 680 shares)

of total share capital of Nedbank Group Limited and equating to black ownership of 11,13% of the value of NedNamibia Holdings

Limited, Nedbank Group’s Namibian business in 2006.

borrowIng groupA group of clients and their underlying loans and advances according to the per person definition of the ‘Regulations Related to Banks’.


DEFiNiTiONScontinuedCapITal adequaCy raTIoThe capital adequacy of South African banks is measured in terms of the South African Banks Act requirements. The ratio is calculated

by dividing the Tier 1, secondary (Tier 2) and tertiary (Tier 3) capital by the risk-weighted assets.

group CapITal adequaCy raTIoGroup capital adequacy is the ratio of group net qualifying capital and reserve funds to total group risk-weighted assets as calculated

per the South African Banks Act requirements.

prIMary (TIer 1) CapITalPrimary capital consists of issued ordinary share capital and perpetual preference share capital, qualifying perpetual callable hybrid

capital, retained earnings and reserves, less regulatory deductions.

Core TIer 1 CapITalCore Tier 1 capital is Primary Capital less any amount on non-core Tier 1 capital, being perpetual preference share capital and

qualifying perpetual callable hybrid capital

seCondary (TIer 2) CapITalSecondary capital is made up of subordinated dated debt and certain types of perpetual callable debt, excess amount in respect of

eligible provisions, 50% of any revaluation surplus less regulatory deductions.

TerTIary (TIer 3) CapITalTertiary capital consists of capital obtained by way of unsecured subordinated loans, subject to such conditions as may be prescribed.

Cash FlowFInanCIng aCTIvITIesActivities that result in changes to the capital structure of the group.

InvesTMenT aCTIvITIesActivities relating to the acquisition, holding and disposal of property and equipment and long-term investments.

operaTIng aCTIvITIesActivities that are not financing or investing activities and arise from the operations conducted by the group.

CredIT loss raTIoCredit loss ratio is the impairments charge as a percentage of average advances.

deFaulTed advanCeAny advance or group of advances that has triggered relevant definition of default criteria for that portfolio which is in line with the

amended BA regulations relating to banks. For retail portfolios it is transaction centric and therefore a default would be specific to

an account (specific advance). For wholesale portfolios it is client or borrower centric meaning that in the event of any transaction

within a borrowing group default, then all transactions within the borrowing group would be defaulted.

deFInITIon oF deFaulTAt a minimum, a default is deemed to have occurred where a material obligation is overdue for more than 90 days or an obligor

exceed an advised limit for more than 90 days.

deFerred TaxaTIon asseTsDeferred taxation assets are the amounts of income taxation recoverable in future periods in respect of:

• deductible temporary differences arising due to differences between the taxation and accounting treatment of transactions; and

• the carry forward of unused taxation losses.

deFerred TaxaTIon lIabIlITIesDeferred taxation liabilities are the amounts of income taxation payable in future periods due to differences between the taxation

and accounting treatment of transactions.

131b

dIreCT TaxaTIonDirect taxation includes normal taxation on income, capital gains taxation (CGT) and secondary taxation on companies (STC).

dIvIdend/dIsTrIbuTIon CoverHeadline earnings per share divided by the dividend/distribution declared per share.

dIvIdend/dIsTrIbuTIon deClared per shareDividend/distribution declared per share is the actual interim dividend paid/capitalisation award issued and the final dividend declared/

capitalisation award declared for the period under consideration, expressed in cents.

dIvIdend/dIsTrIbuTIon paId/CapITalIsed per shareDividend/distribution paid/capitalised per share is the actual final dividend paid/capitalisation award issued for the prior year and the

interim dividend paid/capitalisation award issued for the year under consideration, expressed in cents.

dIvIdend yIeldDividend/capitalisation award declared per ordinary share as a percentage of the closing share price of ordinary shares.

down Turn expeCTed lossA stress-tested value for expected loss under down turn economic conditions that could have unfavourable effects on a bank’s credit

ecxposures.

dTI CodesThe Codes of Good Practice as promulgated on 9 February 2007 under section 9(1) of the Broad-Based Black Economic Empowerment

Act, 2003 (Act No. 53 of 2003), establishes the rules, targets and stipulations for the measurement of Broad-Based Black Economic

Empowerment within South Africa based on three scorecard classifications for organisations: Emerging Micro Enterprise (EME),

Qualifying Small Enterprise (QSE), or Generic Enterprise. Nedbank is scored as a Generic Enterprise under the published codes.

earnIngs per share (eps)basIC earnIngs basIsIncome attributable to equity holders for the period divided by the weighted average number of ordinary shares in issue (net of shares

held by group entities) during the period.

headlIne earnIngs basIsHeadline earnings divided by the weighted average number of shares in issue (net of shares held by group entities) during the period.

Fully dIluTed basIsThe relevant earnings figure is adjusted for the assumed adjustments to income that would have been earned on the issue of shares

issued from dilutive instruments. The resultant earnings are divided by the weighted average number of ordinary shares and other

dilutive instruments (i.e. potential ordinary shares) outstanding at the period-end, assuming they had been in issue for the period.

earnIngs yIeldHeadline earnings per share as a percentage of the closing price of ordinary shares.

eConoMIC CapITal (eCap)Economic capital is the quantification of risk and an internal assessment of the amount of capital required to protect the group

against economic losses with a desired level of confidence (solvency standard or default probability) over a one-year time horizon. In

other words, it is the magnitude of economic losses the group could withstand while still remaining solvent.

eConoMIC proFIT or lossHeadline earnings after adjusting for cost of capital.

eFFeCTIve TaxaTIon raTeThe taxation charge in the income statement, excluding taxation relating to non-trading and capital items, as a percentage of profit

before taxation.


DEFiNiTiONScontinuedeFFICIenCy raTIo (CosT-To-InCoMe raTIo)Total expenses as a percentage of income from normal operations (net interest income plus non-interest revenue).

exposure aT deFaulTEAD is an estimation of the extent to which a bank may be exposed to a counterparty in the event of, and at the time of, that

counterparty’s default.

expeCTed loss (el)EL is the expected value of portfolio losses due to default over a specified time horizon.

ForeIgn exChange TranslaTIon gaIns/lossesThe results and assets/liabilities of all foreign entities controlled by the group that have a rand-functional currency are translated at

the closing exchange rate and the differences arising are recognised in the income statement as foreign exchange translation gains/

losses.

headlIne earnIngsHeadline earnings is not a measure of maintainable earnings. For purposes of the definition and calculation, the guidance given on

headline earnings, as issued by The South African Institute of Chartered Accountants in circular 07/02 of December 2002, has been

used. Headline earnings consist of the earnings attributable to ordinary shareholders excluding non-trading and capital items.

IFrsInternational Financial Reporting Standards, as adopted by the International Accounting Standards Board (IASB), and interpretations

issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. Nedbank Group’s consolidated financial

results are prepared in accordance with IFRS.

IMpaIrMenT Charge To average advanCesImpairment charge on loans and advances for the year divided by average advances. Also known as the credit loss ratio or impairment

ratio.

IMpaIrMenT oF loans and advanCesImpairment of loans and advances arises where there is objective evidence that the group will not be able to collect an amount due.

The impairment is the difference between the carrying amount and the estimated recoverable amount.

IndIreCT TaxaTIonValue Added Taxation (VAT) and other taxes, levies and duties paid to government, excluding direct taxation.

‘jaws’ raTIoThe difference between the rate of growth in total income from normal operations and the rate of total expense growth.

jIbarJohannesburg Interbank Agreement Rate, which is the rate that South African banks charge each other for wholesale money.

kIng II (The Code)The King Report on Corporate Governance 2002, which sets out principles of good corporate governance for South African companies

and organisations.

kIng IIIThe revised King Code and report on Governance for South Africa 2009, which sets out revised principles of good corporate governance

for South African Companies.

lIborLondon Interbank Offered Rate, which is the rate that banks participating in the London money market offer each other for short-

term deposits.

133b

MarkeT CapITalIsaTIonThe group’s closing share price multiplied by the number of shares in issue including shares held by group entities.

neT asseT value per shareTotal equity attributable to equity holders of the parent divided by the number of shares in issue, excluding shares held by group

entities.

neT InTeresT InCoMe To average InTeresT-earnIng asseTs (neT InTeresT MargIn)Net interest income expressed as a percentage of average net interest-earning banking assets. Net interest-earning banking assets are

used, as these closely resemble the quantum of assets earning income that is included in net margin.

non-InTeresT revenue To ToTal expensesNon-interest revenue as a percentage of total expenses from normal operations.

non-InTeresT revenue To ToTal InCoMeNon-interest revenue as a percentage of total income from normal operations.

non-TradIng and CapITal ITeMsThese comprise the following:

• surpluses and losses on disposal of long-term investments, subsidiaries, joint ventures and associates;

• impairment of goodwill arising on acquisition of subsidiaries, joint ventures and associates;

• surpluses and losses on the sale or termination of an operation;

• capital cost of fundamental reorganisation or restructuring having a material effect on the nature and focus of the operations of the

reporting entities;

• impairment of investments, property and equipment, computer software and capitalised development costs; and

• other items of a capital nature.

oFF-balanCe-sheeT asseTsAssets managed on behalf of third parties on a fully discretionary basis.

prICe/earnIngs raTIoThe closing price of ordinary shares divided by headline earnings (for the previous 12 months) per share.

properTIes In possessIon (pIps)Properties acquired through payment defaults on loans secured by properties.

reTurn on ordInary shareholders’ equITy (roe)Headline earnings expressed as a percentage of average equity attributable to equity holders of the parent.

reTurn on ordInary shareholders’ equITy (roe) exCludIng goodwIllHeadline earnings expressed as a percentage of average equity attributable to equity holders of the parent less goodwill.

reTurn on ToTal asseTs (roa)Headline earnings expressed as a percentage of average total assets.

rIsk-weIghTed asseTs (rwa)Risk-weighted assets are determined by applying risk weights to balance sheet assets and off-balance sheet financial instruments

according to the relative credit risk of the counterparty. The risk weighting for each balance sheet asset and off-balance sheet financial

instrument is regulated by the South African Banks Act or by regulations in the respective countries of the other banking licences.


DEFiNiTiONScontinuedsarb regulaTIons relaTed To banks and The ba reTurnsThe regulations relating to banks were amended with affect 01/01/2008, based on the revised Basel Capital Accord (Basel II). The new

Basel Capital Accord of the Bank of International Settlements is an improved capital adequacy framework accomplished by closely

aligning banks’ capital requirements with improved modern risk management practices and sophisticated risk assessment capabilities.

It further ensures the risk sensitivity of the minimum capital requirements by including supervisory reviews and market discipline

through enhanced disclosure. The new Banks Act regulatory returns (BA).

segMenTal reporTIngoperaTIonal segMenTA distinguishable component of the group, based on the market on which each business area focuses, which is subject to risks and

returns that are different from those of other operating segments.

geographICal segMenTA distinguishable component of the group that is engaged in providing services within a particular economic environment and is

subject to risks and returns that are different from those of components operating in other economic environments.

seCurITIsaTIon exposuresThis asset class covers all exposures to tradable, interest-bearing commercial paper, which is secured by an underlying asset, e.g.

mortgage loans

share-based payMenTsTransfers of a company’s equity instruments by its shareholders to parties that have supplied goods or services to the company

(including employees).

shares held by group enTITIes (Treasury shares)Ordinary shares in Nedbank Group Limited acquired/held by group companies, including ordinary shares held in share trusts as part

of the BEE transaction.

ssTSelf-service terminal, similar to an ATM, but designed for non-cash transactions.

The sTandardIsed approaCh (Tsa)An approach to calculate regulatory credit risk requirements which sets out specific risk weights specified by the regulator in lieu of

the AIRB Approach.

TangIble neT asseT value per shareTotal equity attributable to equity holders of the parent less goodwill, computer software and capitalised development costs, divided

by the number of shares in issue, excluding shares held by group entities.

ToTal CollaTeralTotal monetary value of all collateral held by a bank as security for an advance(s), limited to exposure.

ToTal CredIT exTendedTotal of all advances extended by a bank, including unutilised facilities and other off balance sheet exposures.

ToTal equITy aTTrIbuTable To equITy holders oF The parenTOrdinary share capital, share premium and reserves.

weIghTed average nuMber oF sharesThe number of shares in issue increased by shares issued during the period, weighted on a time basis for the period during which they

participated in the income of the group, less shares held by group entities, weighted on a time basis for the period during which the entities

held these shares.

These definitions should be read in conjunction with the group’s accounting policies, which also clarify certain terms used.

135b

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

not limited to, loss of earnings, profits, or consequential loss or damage.


SHARE iNFORMATiONCoMpany deTaIlsnedbank group lIMITedIncorporated in the Republic of South Africa

Registration number: 1966/010630/06

Registered address:

Nedbank Sandton, 135 Rivonia Road, Sandown, 2196, Johannesburg

PO Box 1144, Johannesburg, 2000

Transfer secretaries:

South Africa:

Computershare Investor Services (Pty) Limited

70 Marshall Street, Johannesburg, 2001

PO Box 61051, Marshalltown, 2107

Nambia:

Transfer Secretaries (Pty) Limited

Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek, Namibia

PO Box 2401, Windhoek, Namibia

InsTruMenT Codesnedbank group ordInary sharesJSE share code: NED

NSX share code: NBK

ISIN: ZAE000004875

ADR code: NDBKy

ADR CuSIP: 63975K104

nedbank lIMITed non-redeeMable, non-CuMulaTIve preFerenCe sharesJSE share code: NBKP

ISIN: ZAE000043667

137b

abouT ThIs reporTThis report is printed on Sappi Triple Green – a paper grade manufactured according to three environmental pillars: a minimum of

60% of the pulp used in the production of this paper is sugar cane fibre, which is the material remaining after raw sugar has been

extracted from sugar cane; the bleaching process is elemental chlorine-free; and the remaining pulp used in the production process

comprises wood fibre which is obtained from sustainable and internationally certified afforestation, using independently audited

chains of custody.

nedbank group head office

nedbank sandton 135 rivonia road sandown 2196

po Box 1144 Johannesburg 2000

tel +27 (0)11 294 4444

Fax +27 (0)11 294 6540

transfer secretaries

Computershare investor services (pty) limited

70 marshall street Johannesburg 2001 south africa

po Box 61051 marshalltown 2107 south africa

tel +27 (0)11 370 5000

Fax +27 (0)11 688 5217/8

these results and additional information are available on

www.nedbankgroup.co.za

nedbank group analyst presentation · ‘2010 saw our headline earnings grow for the first time...

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