Financial Results

for the year ended 31 December 2002

Programme

• Year in review– Richard Laubscher

• Financial review– Stuart Morris

• Strategic review– Derek Muller & Tom Boardman

• Prospects– Richard Laubscher

Year in review

Richard Laubscher

The year in contextMacro issues• Microlending malaise• Small bank crisis• Industry consolidation• International bank departures• Rising inflation and interest rates• Strengthening Rand• Community Reinvestment Act and

Financial Charter mooted• Mortgage originators and integrators

A challenging year

Strategic initiatives

• Acquisition of BoE• Acquisition of NIB minorities• Integration of banking subsidiaries• New operating structures developed• Enhanced capital structure• Wealth Management rationalisation• Old Mutual Bank JV refined• Acquisition of Planet Finance

Created a stronger group

Strategic scorecard

AcquisitionsBoE Imperial Gerrard Private Bank FBC Fidelity ENF Didata AlliancesOld Mutual Bank/Bancassurance Pick ’n Pay Go Banking JD/Capital One microlending market Amex/Capital One Outsourcing

Year in review

• Core earnings up from R3,1bn to R3,4bn• Core eps up 4% to 1 330c• Organic growth in interest-earning assets

+17% boosted to +31% by BoE• Topline revenue growth

– Organic: NII +12% NIR +15%– Acquired: NII + 8% NIR +22%

• Expense growthOrganic: +13% Acquired: +22%

• R266m net contribution from BoE– Net profit of R520m offset by funding cost

of R254m• Provisions – SME & Microlending

Segmental performances

(Rm) % ch 2002 2001

Nedbank Retail +87 353 189

Nedbank Commercial -56 256 579

Nedbank Corporate -8 866 945

Nedbank International -30 112 161

Peoples Bank +53 299 195

NIB +22 760 625

Cape of Good Hope Bank +26 120 95

T&O Strategic Investments -171 (32) 45

Group Operations +24 238 192

Acquisitions and alliances’performance

265BoE (net of funding)

20012002% ch(Rm)

-44

-213

+72

+83

+94

(39)

(47)

110

56

72

(27)

(15)

64

30

37

Bancassurance initiatives

JD/Capital One

Pick ’n Pay Go Banking

Gerrard Private Bank

Imperial Bank

(25) 2Amex/Capital One

Merger and integration

• Group restructure triggered by:

– BoE purchase for R7,7bn

– NIB minorities buyout

• Synergy estimates of R905m per annum by 2005

• Regulatory approvals for merger finalised

• R9,2bn new capital raised, enhancing capital structure

– Ordinary capital R3,2bn

– Subordinated debt R4bn

– Preference shares R2bn

Merger and integrationEarly successes• Legal Day One successful• Key decisions on product offering made• Future technology architecture agreed• Healthy funding flow back into BoE

– NBS deposits 103%; Probanker 100%; Business Banking book 107%; BoE assets 115%; no large depositor concentration issues

• Client and staff retention good• Initial staff survey very positive• Nine sets of terms & conditions and nine payrolls

into one from 1 April 2003• Employee Development & Deployment Centre up and

running• Over 20 000 employee positions finalised• Operational merger going to plan

Major merger milestones

Activity

Legal Day OneMigration planningWealth Management LDOProduct offering decisionTreasury integrationCapital markets integrationSystems architecture designPayroll integrationCoGH integration into Nedbank retailCredit Life integrationBoE Business Bank customer migrationPEP Bank integration into Peoples BankCashbank integration into Peoples BankConsumer credit reorganisationPeoples Bank branding developedPrivate Wealth completionCIS (unit trusts) integrationInternational rationalisationPeoples Bank platform upgradesNBS integration into Peoples BankProperty & Asset Finance integrationBusiness Banking integration

Q1 Q2 Q3 Q4 Q4Q3Q2Q1Q4Q3Q2Q12003 2004 2005

1 Jan 2003V.1 Final

Financial review

Stuart Morris

Disclosure

• BoE and NIB separately disclosed

• BoE pre-acquisition adjustments

• Pro forma segmental in Annual Report

• AC133 effective 1 January 2003

Income statement: core earningsyear ended 31 December

*Excluding BoE

2002 2002 2001 % ch % ch* Rm Rm* Rm

Net interest income +20 +12 6 300 5 874 5 268Non-interest revenue +37 +15 6 929 5 833 5 054

Total income +28 +13 13 229 11 707 10 322Provisions +68 +62 1 778 1 712 1 058

Net income +24 +8 11 451 9 995 9 264Expenses +36 +13 7 334 6 140 5 416

Net operating income +7 – 4 117 3 855 3 848Taxation -25 -26 580 569 772

Net income after taxation 15 7 3 537 3 286 3 076Associate income -11 -18 162 148 181Minorities 103 103 (333 (333 (164

Core earnings +9 – 3 366 3 101 3 093Core eps +4 -5 1 330 1 226 1 284

) ) )

NIB BoE*Funding

365 (363)1 173 -1 538 (363) 30 -1 508 (363) 515 -

993 (363) (150) (109)

843 2549 -

92 -

Net interest income Non-interest revenue Total income Provisions Net income Expenses Net operating income Taxation Net income after taxation Associate income Minorities Core earnings 760 254

BoE*

789 1 0961 885

661 819

1 194625

119506

14 -

520

BoE*contribution

426 1 0961 522

661 456

1 194262

10252

14 -

266

2002Rm

* July – December 2002

Handout only

Income statementsyear ended 31 December

Core earnings to headline earnings

Dec Dec% 2002 2001

change Rm Rm

Core earnings 9 3 366 3 093

Translation gains/(losses) (1 011 1 096

General risk provision 400 (400Merger costs (170 –

Headline earnings -32 2 585 3 789

Headline eps -35 1 022 1 574

)

))

Rand appreciation

Rand expectations: using end 2000 as base

6

7

8

9

10

11

12

13

00 01 02 03

actual and forecasthighlowexpected

99 00 01 02

Headline earnings to attributable income

Dec2002

Rm

2 585

(501)

Headline earnings

Goodwill

Dec2001

Rm

3 789

Didata revaluation (1 080) (3 298)

(273)

192

984

Taxation

Attributable income

(171)

13

Merger costs (35)

(177)Other impairments (34)

389Attributable eps 5

–

Goodwill and capital writedowns

Handout only

2002 2001Rm Rm

Goodwill 501 273BoE 214 –The Internet Solution – 131IQ Business Group 58 21Other T&O investments 59 74MBCA (Zimbabwe) 36 –Other goodwill 134 47Impairments 119 34Investment sold 58 –

Total 678 307

Net interest income

2,500

3,000

3,500

4,0004,500

5,000

5,500

6,000

6,500

1998 1999 2000 2001 2002

2.0

2.5

3.0

3.5

4.0

4.5

NII (Rm) Grossed-up margin (%)

Margin (%) BoE (Rm)

Margin after prov. (%)

Rm %

+10.4% +11,1% +8,6%+11,3%

+19,6%

Non-interest revenue

2,000

3,000

4,000

5,000

6,000

7,000

1998 1999 2000 2001 2002

40

45

50

55

NIR (Rm) NIR: Total income (%) BoE (Rm)

Rm %

+23,0% +8,6%+23,1%

+29,0%

+37,1%

Analysis of provisions by activity

% 2002 2001change Rm Rm

Retail Banking 1 417 411Peoples Bank 73 59 34Commercial (21 160 202Imperial Bank 64 105 64Cape of Good Hope Bank (19 29 36Corporate (18 50 61NIB (25 30 40Other 11 105

(10 861 953Microlending 550 195 30SME Book 775 656 75BoE 66 –

68 1 778 1 058

)

))

)

)

SME ringfenced collection book

TradingStart statement Now

Rm Rm Rm

Carrying value 700 700 698Estimated collections (220 (64 (42

480 636 656

Planned provisioning 480 636 656

2002 – normal 190 190 190– additional – 400 466

2003 200 46 –2004 90 – –

) ) )

Non-performing loans

% % %Rm adv Rm adv Rm adv

Non-performing loans 8 001 4,0 7 014 4,4 6 974 4,4Expected recoveries 3 836 2,0 3 603 2,3 3 473 2,2Expected losses 4 165 2,0 3 411 2,2 3 501 2,2Provisions (coverage) 6 553 3,1 4 691 3,0 5 154 3,3Adequacy of provisions– Gross

coverage (%) 82 67 74– Net

coverage (%) 157 138 147

Dec 2002 June 2002 Dec 2001

Capitalised development costs

2002 2001

Opening balance 881 480

Development expenditure 386 549

Commissioned (772 (148

Closing balance 495 881

Software amortisation 182 92

) )

Capital adequacy

2002 2001Rbn %* Rbn %*

Tier 1 14,5 7,0 14,1 8,6– Ordinary capital & reserves 12,5 6,0 14,1 8,6– Preference capital 2,0 1,0 – –Tier 2 8,5 4,0 4,6 2,8– Callable notes 6,0 2,6 2,0 1,2– Other 2,5 1,4 2,6 1,6Total 23,0 11,0 18,7 11,4

*Percentage of risk-weighted assets

BoE acquisition

2,8Goodwill

4,9Adjusted net asset value

7,7Purchase consideration

Rbn

BoE pre-acquisition adjustmentsPost-tax

Handout only

Rm

Net asset value – 31 March 2002 6 058

Headline earnings April – June 2002 97

Exceptional items (173

Net asset value – 30 June 2002 5 982

Fair value adjustments (899

Accounting policy alignments (170

Adjusted net asset value as at 30 June 2002 4 913

)

)

)

Embedded value

Rm 2002Shareholders’ net assets 566Value of in-force business 59Embedded value 625Value of 15 months’ new business 1Embedded value earnings as a % of opening embedded value* (4,7%)

*Embedded value earnings negative due to change in assumptions

Handout only

Indicative new segmental

Earnings AssetsNedbank Corporate 71% 70%

Corporate Banking 23% 15%Commercial Banking 19% 11%Property Finance 8% 14%International 6% 9%Imperial Bank 3% 4%Treasury 3% 12%Other 9% 5%

Retail 8% 20%

Wealth Management 6% 5%Retail Banking 2% 15%

Peoples Bank 4% 3%Capital & Group Services 17% 7%

Strategic review

Derek Muller

Nedbank Corporate

We are an integrated corporate and investment bank offering a full range of services (advisory, debt, equity, and transactional banking) to large and mid size corporates, based on strong enduring relationships, driven by innovative solutions and leading edge technology

R5m turnover

R250m turnover

Nedbank Corporate

CorporateBanking

BusinessBanking

No. of clients : 1 700Market share : ± 22%

No. of clients : 25 000Market share : ± 24%

Nedbank Corporate

Capital Markets

BrianK ennedy

CorporateFinance

R ob Shuter

BusinessBanking

R ichard Buchholz

Corporate Banking

G rahamD empster

ENF

C oenraadJ onk er

W Cape Group Exec

M ik e Thompson

BEE/ PublicSector/ AfricaS ipho P ityana

Property &Asset FinanceM ik e Brown

Treasury

Peter LaneI nternational

R occo R ossouw

Support Services

W illie RossAsh ley S utton - Pryce

K evin H udson

D erek M uller M ichael K atz

Nedbank Corporate

Assets No. of(Rm) people

Corporate Banking 36 600 310

Business Banking 22 300 3 720

Corporate Finance – 30

ENF – 200

Capital markets 10 700 350

Property & Asset Finance 25 000 1 200

International & Africa 23 200 670

Treasury 34 000 340

Total 151 800 6 820

Nedbank Corporate

• Quality asset growth of 12%• RoE 21%• Excellent credit management with low

levels of specific provisions for the year• Strong growth in black empowerment

transactions• Global trade achieved significant market

share gains• Nedbank Investor Services ranked the

premier custody services provider

Handout only

Nedbank Treasury

• Successful integration of treasury rooms• Integrated six back offices into central

processing area• Foreign currency trading profit up 33% on

prior year• Total trading profit up 16% on prior year

Handout only

Nedbank Commercial

• Asset growth of 11% to R16bn Star performer was instalment credit (+18%)

• Client deposits up 27% to R25bn• NIR growth of 12% to R767m. Exceptional

performance in electronic banking and global trade

Handout only

Nedbank International

Handout only

• African subsidiaries NPAT up 54%• African associates down 29%

(MBCA; HSBC Equator; SBM)

• Hong Kong NPAT down 26%• London NPAT down 17%

• Focus on trade finance & private banking

Nedbank CorporateStrategic objectives 2003• Create a common culture• Build on our intellectual capital/

advisory capacity• Build on our very strong corporate relationships

• Maximise our regional strengths• Deeper penetration of the mid-market• Greater focus on public sector• Commitment to growth in Africa and offshore• Total commitment to black economic

empowerment

Nedbank CorporateIntegration update• Treasury consolidation completed 1 February

2003• Systems selected• No funding difficulties• No clients lost• Lost very few senior people• Change management: roadshows/workshops

Some recent deals

• Southern Sun/Tsogo Sun – funding• Cell C – funding & swaps• African Legend/Caltex – advisor• Resilient Properties – listing• Harmony/African Vanguard – advisor• Sandton Towers – property structure• Sasol Service Stations – funding• Telkom IPO – legal advisor• ICC/World Cup – legal advisor

Synergy estimates

135

12

-

43

18

-

Capital Markets

Business Banking

Corporate Banking

Finance & International

Treasury

Total

Property & Asset Finance

62

Handout only

Strategic review (continued)

Tom Boardman

Nedbank Retail & Wealth Management

Retail

PeteBackw ell

W ealthManagem ent

Pau l Leaf- W right

Pete S outhw orth

Old Mutual Bank

J ack de B lanche

Tom Boardm an

View of the market

High net worthTop 300 listed corporates,government, institutions

Businesses

BoE

Old Mutual Bank

Medium size listed,unlisted, professionals

Owner managed

Informal sector

Individuals

Middle income

Mass market

Nedbank Retail

Nedbank Corporate

Peoples Bank

Pick ‘n Pay Go Banking

SA Retail market

Assets > R3 million

Income-basedclassification

BoE 17 000 clients

Asset-basedclassification

Nedbank Personal Banking85 000 clients

Nedbank Retail719 000 clients

Nedbank Private Banking13 000 clients

Income > R500 000 p.a.

Income > R36 000p.a.

Income > R200 000p.a.

Nedbank (Retail) – highlights

• Strategy development started in 2000, focusing on 3 main issues:– Create appropriate working environment– Build sustainable competitive advantage– Fix poor performance

• Detailed 5-year plan, ahead of plan at end 2002

Nedbank (Retail)Financial highlights

• Retail Division has delivered outstanding results for 2002:– Client assets +11%– NII +18%– NIR +13%– Expenses +12%– NIAT +87%

Nedbank RetailIntegration update• Moved product teams to a new “shared

service” Product Division• Moved Unit Trust Company to Wealth

Management• Move of Wealth Management from

Nedbank Private Bank to Wealth Management – in progress

• Move of Cape of Good Hope Bank branches, staff and retail clients into Retail Division – well on track

• Integration of Manager Direct into Nedbank Retail

Handout only

Pick ’n Pay Go Banking

• Phase 3 commenced July 2002– 236 Go Bankers in 14 Hypermarkets and

113 Supermarkets– In-store card delivery– Exclusive discounts– 85 000 accounts / 3 000 new applications per week

Old Mutual Bank

• Division of Nedbank Ltd – 50/50 JV• Leverage dominant Old Mutual brand• Banking products, systems and processes

supplied by Nedcor• Sales, marketing and channel management

supplied by Old Mutual

OMB Business Opportunities

• 2 million OMPF customers• 300 000 ex-Permanent Bank customers• No need to create a brand• Huge intermediary network• Established branch distribution network• No need to use expensive originators for

mortgages

Nedcor Wealth Management

Jointly-owned Businesses with Old Mutual

Private Clients

(South Africa)

Credit Protection

(South Africa)

Wholly-owned Businesses

Retail Investment Products & Services

International Companies

(On and Offshore)

Nedcor Wealth Management

Jointly-owned Businesses with Old Mutual

Private Clients

(South Africa)

Credit Protection

(South Africa)

Wholly-owned Businesses

• Scope of offering to High Net Worth Individuals:– Discretionary Portfolio Management– Private Banking– Other Investment Products– Fiduciary Services:Trusts, Wills,

Estates

Complete offeringboth onshore & offshore

Retail Investment Products & Services

International Companies

(On and Offshore)

No. of staff 554/Clients 17500/AUM R23bn

Private Clients business structure

Old Mutual Trust

BoE Private Bank

BoE Personal Stockbrokers

Nedbank Syfrets Private Banking Wealth Mngmnt

Syfrets Trust

FTNIB Private Client Asset Mgt

Handout only

Private ClientsOne client-centric model

In-sourcing products

FAIRBAIRN

CAPITALNEDBANK

Relationship Manager Distribution

Products• Private Client Asset Mgmnt • Stockbroking • Structured Lending • Fiduciary

Product provision

Product provision

Handout only

Private ClientsImpact of merger• Six different business models to be

combined into one business - presently working with McKinsey & Co to determine optimal business model

• Extended product range for clients– Off-shore opportunities with Gerrard Private Bank– Increase share of wallet of existing customers

(currently single product clients only)• Economies of scale lead to decrease in

relative costs– increasing profitability– eliminate duplication of operations

Handout only

Private ClientsInternational joint venture• Old Mutual and Nedbank have a joint

initiative in Gerrard Private Bank– Comprehensive offering to high net worth individuals– Will be BoE’s offshore offering– Full product range now available on a ‘seamless’

basis• Banking• Trust and Fiduciary Services• Investment Management

– With the representative office recently opened - perfectly positioned to service clients

Handout only

Nedcor Wealth Management

Jointly-owned Businesses with Old Mutual

Private Clients

(South Africa)

Credit Protection

(South Africa)

Wholly-owned Businesses

• Scope of providing banking customers with credit protection– Nedbank customers– JV and Alliances – Other banks customers

Retail Investment Products & Services

International Companies

(On and Offshore)

No. of staff 105 / Premium income R491m / EV R44m

Credit ProtectionImpact of merger• Single focus on credit protection• Repositioning of business as a ‘Bank

Life Company’• Utilise the strengths of both

shareholders– distribution from Nedbank

– expertise from Old Mutual

Handout only

Nedcor Wealth Management

Jointly-owned Businesses with Old Mutual

Private Clients

(South Africa)

Credit Protection

(South Africa)

Wholly-owned Businesses

• Develops, distributes and supports both international and SA investment product solutions to chosen target markets

Retail Investment Products & Services

International Companies

(On and Offshore)

No. of staff 80/Unit holders 133 000/AUM R7bn

Retail InvestmentProducts & services

Retail Products

& Services

OutsourcedAsset

Management

TargetMarket

OutsourcedSupportServices

Both SA & International

• Product research & development

• All collective investment schemes

• Marketing, sales, distribution support

SA

• BoE Private Clients

• BoE Trust Services

• HNW Intermediaries

• LISPs/FOFs

• Nedbank Retail

• Nedbank Corporate

• Group Alliances

International

• Gerrard Private Bank

• Offshore Trust Companies

• HNW Intermediaries

• Gerrard UK

• Offshore Life Companies

SA

• BoE

• Aka

• Nedbank Treasury

• SYmmETRY

• OMAM

International

• Stenham Gestinor

• NIBi

• Chiswell Associates

• OMUS

Handout only

Retail InvestmentImpact of merger• Amalgamation of four unit trust management

companies (BoE, FT-NIB, Nedbank, NIBi)• Definition of a new value proposition and

product set covering active, passive, multi-managed and absolute ranges

• Rationalisation of more than 50 unit trust funds

• Release R30m of under-utilised capital• Distribution, marketing and operational

consolidation, yielding economies of scale• Consolidated negotiation with suppliers on

performance-related SLAs

Handout only

Nedcor Wealth Management

• 3 main focus areas– Private Clients– Specialised Asset Mgmt– Private Banking

Jointly-owned Businesses with Old Mutual

Private Clients

(South Africa)

Credit Protection

(South Africa)

Wholly-owned Businesses

Retail Investment Products & Services

International Companies

(On and Offshore)

No. of staff 430/Clients 26 000/AUM £4,25bn

International Businesses

Chiswell Associates Fairbairn Trust

Gerrard Private Bank

NIBi International

Stenham Gestinor

BoE International

Handout only

International BusinessesNature of business• Private client asset gathering and

management– Fiduciary services– Hedge Funds – Syndicated Property Investments– Linked Investment platform– Retail pooled investments

• Asset Management - manage investments of– families – charities and small institutional funds

• Gerrard Private Bank - offers clients integrated– banking– asset management– fiduciary services– treasury products

Handout only

International BusinessesImpact of merger• Creation of one multi-management

business – Stenham Gestinor Asset Management

– NIBi

• Rationalise the trust businesses– BoE Trust Co

– SG Trustee Services (Channel Islands. Switzerland, Luxembourg)

– Fairbairn Trust/Gerrard Trust

– NIBi Trust Company

• Integration of the management and operations of the international businesses

Handout only

Wealth ManagementLong-term opportunities• We have all the products that are

needed• We have a huge client base providing

growth potential• Our businesses are already profitable

Leads to rapid growth!

Synergy estimates

660

245

103

36

135

127

14

Shared Services

Nedbank Corporate

Nedbank Retail

Peoples Bank

T&O

Total

Wealth Management

R’m

Integration costs being estimated

Synergies will benefit the Group fully in 2005

Handout only

Strategic review (continued)

Richard Laubscher

Peoples BankHighlights• Total assets increased 6% despite 19%

decline in FBC assets• 37% increase in NIR• Net effect of “excess” provisions only

R30m• R130m benefit from assessed losses• Restructuring proceeding well

– Risk and compliance centralised

– More than 1 million transactional clients

– Total assets R12bn (R10bn in advances)

Technology & OperationsHighlights• Financial performance • Process culture • M&R Integration • Digitisation

– CAMSII

– Alpha cost savings– NetBank

• International – Swisscard on track

Prospects Richard Laubscher

Strategy

SA Banking

Corporates

Individuals

Businesses

WealthManagement

Peoples Bank

International

OutsourcingT&O platform

Bancassurance

Alliances

The year ahead

• Strategic platform in place• Retain and grow client base• Integrate operations• Extract synergies• Address non-performing assets• 2002 low base: 2003 therefore

statistically better• 2004: the power in the model should

evidence itself

Implementation & execution