Nedbank Group · JSE:NED
Nedbank — Investor Day (January 2011)
65 slides from Nedbank's investor day presentation, January 2011
Slide 1: Charting a new path to sustainable, profitable growth for Nedbank Retail
Charting a new path to sustainable, profitable growth for Nedbank Retail Ingrid Johnson Group Managing Executive: Retail and Business Banking January 2011 0
Slide 2: Disclaimer
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 le
Slide 3: Retail and Business Banking - Introducing the leadership team
Retail and Business Banking - Introducing the leadership team Name and position Experience and qualification Name and position Experience and qualification Ingrid Johnson (44) 17 years service Sandile Shabalala (44) 16years service / 21 years banking Group Managing Executive: 17 years banking
Slide 4: Intended strategic repositioning shared in August 2010 - recap
Intended strategic repositioning shared in August 2010 – insights, strategic rationale and implementation progress shared today as context ahead of results announcement RECAP “Delivering a choice of distinctive client-centred banking experiences that build many deep, enduring relationships with Nedb
Slide 5: Nedbank has embarked on a strategic journey to turn around the retail business
Nedbank has embarked on a strategic journey to sustainably turn around the retail business Market forces and trends Started by Retail team in October 2009 Large unbanked segment Market insights Initial strategy strawman shared with with financial needs Client segments Board Rise of a middle cl
Slide 6: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 5
Slide 7: Nedbank's eventful history and lack of long-term client franchise investment
In Nedbank‟s eventful history, we did not invest in building our client franchise for the long term, with a consistent cohesive strategy in keeping with market demographic trends Re-organizes Rise of the back Acquisitions Creation of retail Positions for to stem product office distract from division
Slide 8: Low share of mass market clients and participation in economic profit pool
This is evidenced by Nedbank's relative low share of mass market clients and consequential lower participation in this attractive economic profit pool … ROUGH ESTIMATES The largest EP pool opportunity resides in the upper …which, according to analysts, Nedbank has failed to address mass and middle s
Slide 9: Behind other banks in client experience
… while also being well behind other banks in client experience, the most important factor in customers‟ choice of bank Banking Infrastructure Proudly South Community Green experience African More important Less important in bank choice in bank choice NEDBANK Other 3 “Banking experience” has 60% imp
Slide 10: Progress in improving Nedbank's retail brand positioning
Progress has been made in improving Nedbank's retail brand positioning as a bank for all, although bonding remains a challenge and has declined in affluent, our historic strength Other big 3 – Average Jan – June 2006 Jan – June 2010 Jan – June 2006 Jan – June 2010 Bonding 10 14 31 29 Advantage 43 65
Slide 11: Market positioning in products and channels relative to peers
Nedbank has maintained good market positioning in retail deposits, relative to its smaller footprint while, transactional position continues to lag the peer group Relative position 5 year change #1 #2 #3 #4 Home loans 31.1% 30.1% 18.7% 17.0% n/a Motor Finance 35.8% 31.6% 22.3% 10.0% n/a Personal loa
Slide 12: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 11
Slide 13: Two strategic imperatives from external trends and internal context
Two strategic imperatives stem from the deep understanding of external trends and from Nedbank's internal context External context Internal context Growing banked population ▪ Strongly product-focused with (+4.9m by 2020) high and increasing use of capital and liquidity Changing demographics (la
Slide 14: Favourable trends with high growth in middle-income, entry-level and youth segments
Favourable trends in the future with high growth in middle-income, entry-level banking and youth segments Per capita income growth (SA) % JP Landman Source: BOE Private Clients, 19 years 16 years 12 years SA income per capita to increase further % population in LSM groups over time 1994 2000 Demogra
Slide 15: Consumers' high indebtedness remains a concern
Consumers' high indebtedness remains a concern for consumption and credit growth Personal debt as a % PDI Interest service costs as % PDI 90 16 80 14 70 12 60 10 50 8 40 6 30 Debt to income ratio Forecast ratio 4 20 SA Manufacturing production Interest service costs 10 2 Forecast (interest costs) 0
Slide 16: High growth in internet and mobile phone usage; talent growth lags demand
High growth in internet and mobile phone usage; talent growth lags talent demand Internet penetration and Broadband capacity High growth from 20 15 bandwidth, electronic, 10 Af rica Broadband capacity Terra bps internet, mobile & 5 (f rom new cables) technology developments 0 RHS 00 01 02 03 04 05 0
Slide 17: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Strategic intent ▪ Target organisation ▪ Strategic initiatives ▪ Implementation roadmap ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 16
Slide 18: Strategic intent: building banking relationships with all in South Africa
Nedbank Retail will build banking relationships with all in South Africa, leveraging distinctive strengths, underpinned by world class risk management STRATEGIC INTENT Delivering a choice of distinctive client-centred banking experiences that build many deep, enduring relationships with Nedbank Deli
Slide 19: Delivering households a choice of client centred banking experiences
Delivering "households" a choice of positive client centred banking experiences1 will be at the heart of what Nedbank Retail will stand for, underpinned by world-class risk management Our response to Elements of customer value the strategic Important cornerstones of proposition specific to strategic
Slide 20: Households is at the core of the new strategy
"Households" is in the core of the new strategy “By understanding your aspirations and financial goals, we Make Things Happen for you” Great at listening, understanding clients‟ needs & delivering 19
Slide 21: Households includes influencers, dependants and natural groupings
"Households" includes influencers, dependants and natural groupings Relationship banking Consumer banking Household ▪ Transactional Household ▪ Transactional ▪ Credit Card ▪ Debit card ▪ Savings ▪ Education Policy ▪ Home Loan ▪ Funeral Plan Influencer ▪ Education ▪ Personal Loan plan ▪ Savings ▪ Inv
Slide 22: Deepening relationships along key moments of truth
We will focus our efforts to deepen our relationship with all our customers along key moments of truths Moments of Truth and Life events xxx Moment of truth Financial/ xxx Life event Annual Income Banking ZAR Married/living together Advice 50,000 and children Vulnerable 45,000 First Job moments1 40,
Slide 23: Improving across key moments of truth
Compared to the status quo Nedbank could improve across High impact key moments of truth Estimated Impact1/ MOTs Current status Ideal future priority1 ▪ Inconsistent process joining the bank with ▪ Easy to understand and streamlined joining process starting often several iterations/interactions need
Slide 24: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Strategic intent ▪ Target organisation ▪ Strategic initiatives ▪ Implementation roadmap ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 23
Slide 25: Aligning all organisational elements to the new strategy
Nedbank will align all its organisational elements to the new strategy … 7S Ideal future Current reality Structure ▪ Client focused units, underpinned by ▪ Strong product lines vs. segments – strong product niches and functions – choice of channels ▪ Duplication of resources – strong shared function
Slide 26: Selected initial organisational (7S) choices
… with selected initial organisational (7S) choices … Ideal future Current reality Strong proactive ▪ Risk as first line of defence, partnering with ▪ Risk as 2nd line of defence, with limited risk management monolines to optimise strategic risk strategic risk management capability management and de
Slide 27: New organisational design aligned to strategic intent
… reflected in the new organisational design to align its structure to the strategic intent Business Secured Banking: Lending: Sandile Keith Shabalala Hutchinson Great at listening, Retail Relationship R understanding Strong Banking: clients‟ needs & functional Sibongiseni delivering areas Ngundze P
Slide 28: Consumer, Relationship, Card and Secured Lending operate cohesively
Consumer Banking, Relationship Banking, Card and Secured Lending will operate cohesively to deliver Retail‟s strategic intent Consumer ▪ Strong team with complementary skills Client Value Management and Banking ▪ Mandate to significantly grow middle market, Ciko Thomas Personal Banking entry-level b
Slide 29: Delivery of strategy balanced across key areas
Delivery of strategy integrated yet balanced across 5 key areas with very distinctive & differing challenges / opportunities – leadership focus streamlined & optimised Secured Lending Card Consumer Banking Relationship Banking Business Banking Keith Hutchinson Sydney Gericke Ciko Thomas Sibongiseni
Slide 30: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Strategic intent ▪ Target organisation ▪ Strategic initiatives ▪ Implementation roadmap ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 29
Slide 31: Strategic journey consists of 12 step change initiatives
Nedbank Retail‟s strategic journey consists of 12 step change initiatives ▪ Choice of distinctive client centred banking experiences offered to all and embracing full household2 ▪ Sound risk management ▪ Efficient cost structure Strengthen Rise Collaborate Support the Heart / Enable 1 Build deep end
Slide 32: Voice of the customer reveals needs in deep banking
1 A detailed voice of the customer analysis reveals clients' needs 2 3 in "deep banking" Customer profiles/ Work and revenues Voice of the customer/ (ZAR/year) A day in the life of… I need a bank that… Based on this, we will always… Affluent segment ▪ We are busy advancing our ▪ Offers me wealth man
Slide 33: Cross-selling ratio can be increased
1 2 Cross-selling ratio can be increased 3 PRELIMINARY Nedbank will increase its cross-sell ratio significantly across …moving closer to all segments… best in class examples Cross-sell ratio, current (2010) and upside potential1 (2020) Best practice ratio 6.0 Upside potential1 5.1 5.0 4.8 0.5 4.0 4.
Slide 34: Cross-selling ratio can be increased with the right bundles
1 2 Cross-selling ratio can be increased with the right cross-sell bundles 3 UPPER MASS AND MIDDLE SEGMENT High-volume bundle Most % of customers New clients with single product, 2010 Number of customers who common 2nd taking this as 2nd then took a 2nd product product product Current Personal loan
Slide 35: Significant cross-sell opportunity in consumer card issuing
1 3 There is significant cross-sell opportunity in consumer 5 card issuing Acquisition over the last 12 months Where we stand and what we plan ▪ Consumer Card Issuing remains important source for acquiring new customers for Nedbank Retail New to Nedbank 40% New to Card % New to nedbank 35% ▪ Current
Slide 36: Step change of small business value proposition
1 A step change of our small business value proposition should 2 3 trigger a virtuous cycle with our individual client base SMALL BUSINESS AND ENTREPRENEUR Strategic thrust Ideal Future Current Reality ▪ Integrated individual and small▪ Separate affluent and small Holistic offer – business offer bus
Slide 37: Home Loans used judiciously as part of holistic strategy
Home Loans will be used judiciously as part of Nedbank‟s holistic strategy 4 to gain many deep client banking relationships in an EP positive way ... High level strategic objective – Managing for Value ▪ Restore Nedbank Retail as primary client interface and advocate for the buyer as Nedbank carries
Slide 38: Selective origination across key client segments preferred
... with selective origination across key client segments being the 4 preferred strategic option, which also aligns with Group Risk Appetite ILLUSTRATIVE Illustrative Performing portfolio in 2015 – Economic Profit in Rm Preferred option Volume Growth Selective Growth Containing Risk (20% of new gran
Slide 39: Retail leveraging opportunities in mobile and innovative technologies
5 Retail is leveraging opportunities in mobile and other innovative technologies Ambition Where we stand and what we plan ▪ New business established in Retail ▪ First innovation launched: M-PESA from September 2010 to focus on ▪ 3 year plan currently being finalised, but initial view using mobile an
Slide 40: Clear plan to lead in mobile and digital channels
5 Retail has a clear plan to become the leader in mobile and digital channels By December 2015 we aim to Be the leading provider of mobile and digital financial service offerings in the markets serviced by Nedbank By Building a digitally Building core mobile Adopting revenue Providing mobile service
Slide 41: Cross-sell opportunity for Card Acquiring and Transactional Products
5 Significant opportunity exists for the cross sell of Card Acquiring and Transactional Products Primary focus area for cross- Key focus for Business sell of card cross-sell to Banking acquiring primary banking • Align the Acquiring Sales status, including force with BB & SBS cash 33,5% • 35% of the
Slide 42: Retail distribution has been growing in key channels
11 Nedbank Retail's distribution has been growing in key channels Number of outlets 438 452 Branches1 +14 Customers will find it increasingly convenient, Personal loans 43 easy and affordable to bank 30 +13 branches at their channel and time of choice. 250 320 Currently: Personal loans kiosks +70 ▪
Slide 43: Optimising physical distribution in urban, semi-urban and rural areas
Nedbank will optimize its physical distribution in urban, semi-urban and 11 rural areas to align with client needs and demographics strongly complementing virtual channels and wholesale needs PRELIMINARY Nedbank will increase its distribution yet still have a Distribution network expansion will be i
Slide 44: Offering accessible and attractive to target market, as evidenced by branch usage
3 Nedbank‟s offering is accessible and attractive to our target market, 11 as evidenced by branch useage 43 43 SOURCE: Team
Slide 45: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Strategic intent ▪ Target organisation ▪ Strategic initiatives ▪ Implementation roadmap ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 44
Slide 46: Phased approach - fix the basics, then high-impact initiatives
Nedbank Retail employs a phased approach - fix the basics for a good client experience and commence with high-impact initiatives Drive internal cohesion & Corresponding step Basics of good client quality client growth Enhanced, consistent client x banking experience banking experiences change initia
Slide 47: Detailed action plans with clear owners
Detailed action plans are in place for each initiative with clear owners and concrete next steps have been agreed upon Detailed action plan for each 12 initiatives Strengthen the Heart Activity 2011 2012 2013 ▪ Broader stakeholder Analyze existing customer data to place clients in right part Build
Slide 48: Rebalancing earnings to transactional banking and sustainable EP
We will rebalance Nedbank Retail‟s earnings to transactional banking and sustainable EP, underpinned by strong risk management ILLUSTRATIVE EP growth Transactional Liabilities Assets Total Base line Future 47 SOURCE: Team; CFOs
Slide 49: Retail impairments CLR will trend higher due to asset mix
Retail impairments CLR1 will trend higher due to the change in the asset mix PRELIMINARY The client centered strategy will influence the asset mix; assets will be used as lever to Based on projected asset mix, the H1 CLR attract primary, transactional and deposit would be 3.28% and not 2.93% clients
Slide 50: Careful implementation will be key
Careful implementation will be key Implementation will be crucial to delivering the strategy and will have many challenges (significant change management, a combination of reengineering and re-alignment, culture and values, systems). As a consequence – The implementation team needs to be world-cla
Slide 51: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary 50
Slide 52: Nedbank M-PESA: step-change in innovation and win in mobile
3 5 Nedbank M-PESA: step-change in innovation and win in mobile Focus of launch on brand awareness and establishment of distribution footprint 435 Nedbank branches activated in 40 days 2 700 outlets active by end of 2010 – including Nedbank, PEP, Chatz, 4U stores and Vodashops Additional out
Slide 53: Retail Relationship Banking - a customer's perspective
2 Retail Relationship Banking - a customer's perspective Dear Pule and Terry In August this year I was ready to call it quits with Nedbank. After nearly 20 years of banking with you – my patience had finally run out and after years of appallingly bad service from a plethora of so-called Private Bank
Slide 54: Nedbank has added new Internet functionality
9 11 Nedbank has added new Internet functionality More secure internet banking by implementing Trusteer Enhanced Security Online opening and management of Nedbank investment accounts Instant Payments functionality allowing immediate processing of payments Future dating of Prepaid airtime purchases S
Slide 55: Nedbank Easy Access: enhanced client experience
1 6 Nedbank Easy Access: enhanced client experience 5 11 Extended hours and testing branches open for trading on Sundays 57
Slide 56: Nedbank Personal Loans: efficient, client-centered processes
11 Nedbank Personal Loans: efficient, client-centered processes SOURCE: Team 58
Slide 57: History of client frustrations from disparate front end systems
9 The history of client frustrations from disparate product-driven 12 front end systems.... SOURCE: Team 60
Slide 58: Integrated client driven platform for client and staff experience
9 .... to an integrated client driven platform for enhanced client 12 and staff banking experience (full roll out Q4 2011) SOURCE: Team 61
Slide 59: Exposure to high LTV business virtually stopped
Exposure to high LTV business virtually stopped with > 95% lending 4 reduced to less than 10% from early 2009 New Purchase Loans by LTV band Rb > 101% LTV1 80-101% LTV < 80% LTV 5,1 7,1 2,3 4,3 24,0 26,0 17,6 20,1 0,2 0 9,1 9,4 13,9 12,9 11,0 8,6 7,5 6,2 2005 06 07 08 09 2010 1 101% LTV due to capit
Slide 60: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary | 63
Slide 61: Key focus areas for 2011
Nedbank Retail and Business Banking key focus areas for 2011 Align product, channel and client insight to deliver great client banking experiences (span of control, front-line effectiveness, access, cost efficiencies, market positioning) Fix the economics of Secured Lending (by improving the risk pr
Slide 62: Discussion topics
Discussion topics ▪ Where have we come from ▪ Trends in retail banking ▪ Charting a new path to sustainable, profitable growth ▪ Implementation progress ▪ Key focus areas for 2011 ▪ Summary | 66
Slide 63: In summary: 1/2
In summary: 1/2 ▪ Two strategic imperatives stem from the evolution of the South African banking market and Retail‟s internal challenges and strengths: an increased focus on building many deep enduring client banking relationships and investing in attractive growing segments (youth, entry-level and
Slide 64: In summary: 2/2
In summary: 2/2 ▪ To deliver this strategy, Nedbank Retail has designed a plan consisting of 12 step change initiatives, over and above business as usual, synthesised into four key themes – Strengthen the heart: Growing number & depth of “households” & small businesses (servicing owner & business as
Slide 65: Questions & answers
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