NEDBANK GROUP LIMITED – Preliminary audited results for the 12 months ended 31 December 2016

SENS announcement for JSE listed company: NED
                        

NED 201702280013A
Preliminary audited results for the 12 months ended 31 December 2016

NEDBANK GROUP LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
(‘Nedbank Group’ or ‘the Group’)

Preliminary audited results
for the year ended 31 December 2016

Nedbank Limited Reg No 1951/000009/06. Authorised financial services and registered credit provider (NCRCP16).

Headline earnings
Increased 5,9% to R11 465m
(excl ETI)
Increased 16,2% to R11 839m

Diluted HEPS
Increased 4,8% to 2 350

Tier 1 capital adequacy ratio
Increased 13,0% (2015: 12,0%)

ROE (excl goodwill) of 16,5%

Credit loss ratio
Decreased 68 bps (2015: 77 bps)

Full-year dividend per share
Increased 8,4% to 1 200 cents

Excellent performance from Nedbank Group’s managed operations, offset by loss from ETI associate

‘Nedbank delivered a solid performance in 2016, with excellent
growth from our managed operations offsetting an attributable
loss from our associate ETI. Excluding ETI, headline earnings
from our managed operations grew 16,2% and ROE, excluding
goodwill, was 18,1%, driven by strong revenue generation and
good credit risk management.

CIB’s earnings growth of 15,5% reflects the benefits to revenue
generation from deeper client penetration as a result of the integrated
business model. RBB’s ROE increased from 16,6% to 18,9% and was
supported by middle-market transactional client growth of 6,3% and
market share gains in key advances and deposit categories, resulting in
transactional revenues increasing 8,7%. Nedbank Wealth produced
reasonable growth while maintaining a high ROE.

The performance of our approximately 20% investment in ETI was
below our expectations, as it was impacted by weaker economic
conditions in West Africa and currency volatilities, particularly in Nigeria.
This led to the carrying value of our investment in ETI decreasing to
R4,0bn at year-end, including an impairment provision of R1,0bn based
on the value-in-use calculation performed in terms of International
Financial Reporting Standards.

Conditions in the key markets in which ETI operates are currently
expected to remain difficult in 2017, before improving in 2018 and
beyond. Our performance guidance for the full year in 2017 is currently
for growth in diluted headline earnings per share to be greater than the
consumer price index plus GDP growth.’

Mike Brown
Chief Executive

BANKING AND ECONOMIC ENVIRONMENT
Global political and economic risk increased sharply as 2016
progressed, intensified by the UK’s unexpected decision to
leave the European Union (Brexit), the election of
Mr Donald Trump as US president and the general surge in
antiglobalisation sentiment across many developed countries.
These developments have fuelled uncertainty, triggered
significant changes in global investment strategies and
undermined capital flows to many emerging economies.
Economic growth in a number of emerging countries was
affected by political challenges, the prolonged downturn in
global commodity prices or severe drought conditions. The
International Monetary Fund estimates marginally slower
global growth in 2016 of 3,1% (2015: 3,2%) due to advanced
economies easing to 1,6% (2015: 2,0%) and emerging markets
expanding to 4,1%, with growth in sub-Saharan Africa slowing
sharply to 1,6% (2015: 3,4%).

Growth of SA gross domestic product (GDP) slowed to 0,4%
for the first three quarters of 2016, relative to growth of 1,3%
in 2015. Rand volatility reflected the decline in business and
investor confidence in SA and the risk of the sovereign credit
rating being downgraded to subinvestment-grade levels by at
least one of the rating agencies. Inflation increased above the
upper 6,0% target range of the South African Reserve Bank
(SARB) to end the year at 6,8% and, as a result, the prime
interest rate increased by 75 basis points (bps) to end the
year at 10,50%.

Following the combined efforts of government, business and
labour to avert a sovereign-ratings downgrade and promote
higher levels of inclusive growth, all three major rating
agencies, S&P Global Ratings, Moody’s and Fitch, reaffirmed
SA’s investment-grade status in 2016. The risk of a
downgrade remains in 2017, with two agencies ranking SA at
only one notch above subinvestment grade and all three
agencies placing the country on a negative outlook. A ratings
downgrade will negatively impact all South Africans, and to
avert this, the SA economy requires higher levels of inclusive
growth. We will continue to work with business, government
and labour to achieve this.

Tough macro conditions continued to place household
finances and company profits under pressure. Credit demand
has slowed down substantially, with weak levels of growth in
loans to households and companies, and modest growth in
total private sector credit extension of 4,6% in November
2016, compared with 10,2% at the end of 2015. The progress
in 2016 on the ratings front, coupled with a moderate
improvement in global commodity prices and expectations of
stronger global growth in 2017, lifted the rand to end 2016
almost 19% stronger against its trade-weighted basket of
currencies. The SARB has indicated that the interest rate
cycle is close to its peak, as inflation is forecast to return to
within the target range during 2017.

REVIEW OF RESULTS
Despite this challenging background, Nedbank Group’s
managed operations produced an excellent performance
for the year ended 31 December 2016, driven by net interest
income (NII) and non-interest revenue (NIR) growth, while
historic loan origination practices and focused credit risk
management enabled the credit loss ratio (CLR) to remain
below the mid-point of our through-the-cycle (TTC) target
range. Headline earnings grew 5,9% to R11 465m and,
excluding the impact of Ecobank Transnational Incorporated
(ETI), our managed operations grew headline earnings by
16,2% to R11 839m.

Diluted headline earnings per share (DHEPS) increased 4,8%
to 2 350 cents (2015: 2 242 cents) and headline earnings per
share (HEPS) grew 5,1% to 2 400 cents (2015: 2 284 cents).
Excluding ETI, DHEPS was up 15,1%.

Return on average ordinary shareholders’ equity (ROE),
excluding goodwill, of 16,5% (2015: 17,0%) and ROE of 15,3%
(2015: 15,7%) reflect a slightly lower return on assets (ROA)
of 1,23% (2015: 1,25%) as a result of the loss in equity-
accounted earnings from ETI. Excluding ETI, the ROA was
1,27% (2015: 1,18%). Economic profit (EP) decreased to
R1 565m (2015: R2 525m) due to the impact of ETI and a
higher cost of equity (COE) of 14,2% (2015: 13,0%).

Our tier 1 capital ratio of 13,0% (2015: 12,0%) and our
average liquidity coverage ratio (LCR) for the fourth quarter
of 109,3% (2015 quarterly average: 88,5%) are both well
above regulatory requirements of 8,375% and 70,0%
respectively. On a pro forma basis our net stable funding
ratio (NSFR) is above 100%.

DELIVERING SUSTAINABLY TO ALL OUR STAKEHOLDERS IN 2016
Banks play an important role in a nation’s economy by providing a safe foundation for individuals and businesses to invest or
deposit their money, which in turn enables banks to advance loans to individuals and businesses. The ability of society to borrow
from banks helps individuals build homes for their families or have transport to travel to work, and businesses to grow and
create jobs. Banks essentially facilitate economic growth and job creation, helping our nation to become stronger and better.

As a bank we are deeply committed to our purpose of using our financial expertise to do good for individuals, families,
businesses and society. Through our role in SA’s society and the economy as a whole we not only contribute directly to our staff,
clients, shareholders, regulators and communities, but we also create long-term value for future generations of South Africans.

For staff

We created 1 089 new permanent-employment opportunities and
invested R413m in staff training, with more than 19 600 staffmembers
participating in learning interventions and 1 140 staffmembers being
supported through bursaries for further development. We also assisted
2 379 staffmembers with their children’s education commitments and
1 127 staffmembers with medical costs not covered by medical aid or
gap cover. In continuing to support our country to reduce
unemployment among the youth and address skills shortages, in the
past five years we have successfully engaged 699 external bursars
across 19 universities and 11 038 individuals through learning
programmes and learnerships, including 449 candidates through
several of our graduate programmes for chartered accountants,
quantitative analysts and various other professionals. Cumulatively,
over 84% of the youth given learnership and agraduate opportunities
are black and 52% are women. Nedbank’s leading position as a top
empowerment company in the financial services sector and a leader
of transformational change in SA was recognised at the 15th Annual
Oliver Empowerment Awards, where we were honoured as Legend
of Empowerment and Transformation.

For clients

We provided innovative offerings and improved client access by rolling
out an additional 219 Intelligent Depositors, including 170 self-service
devices, 6 025 new point-of-sale devices, and converting a further 45
branches to smaller and more digitally focused branches of the future
since December 2015. Retail main-banked clients increased 3,0%,
including middle-market clients by 6,3% and digitally enabled and
active clients grew strongly, driving up the value of Nedbank App Suite™
transactions by 60,0% to R25,0bn. Information technology (IT) system
stability was maintained at 99,89% and we processed over 15bn
transactions, enabling our clients to pay for goods and services. We
advanced R162bn (2015: R185bn) of new loans to clients, including
R80,9bn to Retail and Business Banking (RBB) clients and R25,7bn to
small and medium enterprises (SMEs) and Business Banking clients, as
well as R3,9bn for affordable housing to Corporate and Investment
Banking (CIB) clients. In addition, over R50bn of infrastructure finance
was drawn and committed. Assets under management grew by 6,2%
to R273,3bn (2016: R257,3bn), with Nedgroup Investments placed
among the top three domestic management companies for the eighth
consecutive year, in addition to winning in the Offshore Management
Company of the Year category and achieving third place in the South
African Management Company of the Year category at the 21st Annual
Raging Bull Awards.

For shareholders

We increased net asset value per share to 15 830 cents
(2015: 15 685 cents) and delivered EP of R1 565m and a total
shareholder return of 32,3%, including increasing the dividend 8,4%.
We also realised R8,2bn in value for over 500 0000 of our broad-
based black economic empowerment (BBBEE) shareholders through
our BBBEE schemes on maturity. We also engaged constructively with
shareholders in over 350 meetings, and at our 49th annual general
meeting all resolutions were passed with more than 90% votes of
approval. We ensure transparent, relevant and timeous reporting and
disclosure to shareholders, as acknowledged by Nedbank’s Integrated
Report being ranked in the top tier of JSE-listed companies by EY,
Chartered Secretaries and Nkonki.

For regulators

We maintained full compliance with Basel III phase-
in requirements, achieving an improved tier 1 ratio
of 13,0%, an average long-term funding ratio of
29,6% and an average LCR ratio of 109,3% in the
fourth quarter. We have invested over R100bn in
government and public sector bonds as part of our
high-quality liquid-asset (HQLA) requirements and,
in doing so, remain committed to making a
meaningful contribution to the SA economy,
thereby supporting the funding needs of
government. We also made cash taxation,
contributions of R8,7bn relating to direct, indirect,
pay-as-you-earn and other taxation, maintained
transparent relationships and worked closely with all
regulators to ensure efficient delivery of the various
regulatory programmes and achieved anti-money-
laundering remediation of high-risk clients by the
planned due dates.

For communities

We supported local businesses and the SA
economy, purchasing 75,0% of our procurement
spend locally, with 22,9% from black economic
empowerment (BEE) suppliers, 12,5% from black-
women-owned organisations and 16,7% from
SMEs. We won the Chartered Institute of
Procurement and Supply (CIPS) award for the Best
Supplier and Enterprise Development Project for
the pan-African region in recognition of our support
of local SMEs. Since 2012, we have contributed
R634m to socioeconomic development, with R141m
in 2016, of which more than 50% was allocated to
education. In addition, we supported students in
the Fees Must Fall campaign by contributing R11m
towards bursaries, registration fees and student
debt. The Mogale Empowerment Trust was
established with an investment of R100m in the
MTN Zakhele Futhi Scheme, and dividends earned
on investments will be distributed to beneficiaries,
targeting black student bursaries and enterprise
development initiatives. Since its inception in 1990
our four affinities have contributed more than
R350m to more than 1 200 projects across their
social and environmental development focus areas.
In recognition of our contribution to society in SA,
Nedbank was ranked second by peers in the
Trialogue CSI Handbook for 2016 for our
developmental impact and corporate social
investment, and rated first by non-governmental
institutions. Our Fair Share 2030 strategy enabled
more than R2,3bn of new lending to support
student accommodation and embedded energy in
the commercial and agricultural sectors. We have
committed R35bn towards renewable-energy deals,
of which R13,3bn has been disbursed to date. Our
pipeline for the funding of green buildings continues
to grow, with more than R5,2bn committed over
the next two years. We have maintained our level 2
BBBEE contributor status for the eighth
consecutive year.

CLUSTER FINANCIAL PERFORMANCE
Nedbank’s managed operations generated headline earnings
growth of 16,2% to R11 839m (2015: R10 187m) and delivered
an ROE of 16,7%.
Headline
% earnings ROE
change (Rm)1 (%)
2016 2015 2016 2015

CIB 15,5 6 014 5 208 21,1 22,6
RBB 11,2 4 960 4 460 18,9 16,6
Wealth 5,1 1 192 1 134 35,2 41,5
Rest of Africa
subsidiaries 85,1 87 47 2,1 1,4
Centre 37,5 (414) (662)
Nedbank
managed
operations 16,2 11 839 10 187 16,7 15,5
ETI > (100,0) (374) 644 (9,7) 18,1
Total 5,9 11 465 10 831 15,3 15,7

Nedbank CIB’s excellent growth in headline earnings was
driven by strong revenue generation while maintaining a strong
ROE despite the increase in capital allocation. Growth in
revenue was underpinned by transactional banking client gains
and deeper client penetration through improved and
coordinated client value management across all business units.

RBB continued to improve its ROE, with Retail achieving an
ROE of 17,6%, well above the group’s COE of 14,2%. RBB grew
transactional revenue by 8,7%, driven by growth in
transactional clients, particularly in the middle market,
and market share gains in selected advances and deposit
categories. In addition, collections were well managed and
impairments remained below the TTC target range, with
continued improvement in the personal-loan CLR.

Nedbank Wealth produced reasonable growth while maintaining
a high ROE. This was supported by strong balance sheet growth
and continued low levels of impairments in Wealth Management.
Despite subdued markets, assets under management increased
6,2%, while Insurance earnings declined due to higher weather-
related claims and lower investment income.

Rest of Africa’s earnings were negatively impacted by
earnings from our associate, ETI. The Southern African
Development Community (SADC) subsidiaries grew headline
earnings off a low base, supported by lower headoffice costs
and improved impairments, while we continued to invest in
staff, systems, distribution channels and regulatory
compliance.

The decrease in losses in the Centre was largely due to the
lower cost of basis risk retained in the Centre.

FINANCIAL PERFORMANCE
Net interest income
Strong NII growth of 10,6% to R26 426m (2015: R23 885m)
was underpinned by growth in average interest-earning
banking assets of 7,0% and net interest margin (NIM)
expansion to 3,41% (2015: 3,30%).

The margin improved by 11 bps, benefiting from endowment
income of 18 bps, following the 102 bps increase in average
interest rates in 2016. This benefit was partially offset by
among others:

– 3 bps of asset pricing and asset mix changes, although the
negative mix effect has slowed down materially as our
personal-loan advances book has started to grow; and

– 5 bps of cost of largely Basel III-related liquidity and
funding initiatives.

To align with industry practice from November 2016 average
balances of R6bn in the CIB liquid-asset portfolio were
included in our trading book and removed from average
interest-earning banking assets used as the denominator in
the NIM calculation. This HQLA portfolio, together with the
associated market risk, is managed as part of the trading
book within the group’s Market Risk Framework. The full-year
2016 NIM would have been 3,54% if the remaining R28bn of
average balances had been removed at the beginning of the
year. This change has no effect on NII.

Impairments charge on loans and advances
Impairments decreased by 4,9% to R4 554m (2015: R4 789m)
and the CLR improved to 0,68% (2015: 0,77%) supported by
lower impairments across all our clusters.

The CLR reflects improvements in CIB’s impairments following
the increase in oil and other commodity prices and the
settlement or successful restructuring of certain counters during
the year. RBB’s CLR improved to below the lower end of its TTC
target range. The improvement was underpinned by lower
impairments in Personal Loans and Business Banking.
Postwriteoff recoveries remained stable at R1 157m
(2015: R1 137m), of which R398m (2015: R398m) was attributable
to Personal Loans and R370m (2015: R280m) to MFC.

% TTC
banking Dec June Dec target
CLR (%) advances 2016 2016 2015 ranges

CIB 48,9 0,34 0,31 0,40 0,15 – 0,45
RBB 43,9 1,12 1,23 1,14 1,30 – 1,80
Wealth 4,4 0,08 0,16 0,15 0,20 – 0,40
Rest of
Africa 2,7 0,98 0,76 1,25 0,65 – 1,00
Group 0,68 0,67 0,77 0,60 – 1,00

Total defaulted advances increased to R19 553m
(2015: R17 559m), representing 2,72% of advances (2015: 2,53%).
The increase was largely due to the implementation of the
SARB-driven new curing definition, which resulted in cured
defaulted accounts being kept in defaulted status for six months
after curing. In addition, RBB’s defaulted advances increased off
a low base on the back of cyclical increases in the secured lending
and card portfolios. The slight increase in CIB’s defaulted
advances reflects stress in new sectors following the settlement
or successful restructuring of certain counters. Excluding the
effect of the new curing definition, defaulted advances increased
by 5,0% to R18 445m, which is a more accurate reflection of the
underlying trend in the quality of the book.

The total coverage ratio of 62,2% (2015: 65,0%) includes
specific coverage of 37,4% (2015: 38,0%) and portfolio
coverage on the performing book of 0,69% (2015: 0,70%).
The lower specific coverage was largely driven by the new
curing definition, which led to RBB’s ratio decreasing to 41,1%
(2015: 45,6%). Excluding the effect of the new curing
definition, specific coverage would have been 45,3%. CIB’s
specific coverage increased to 26,3% (2015: 17,1%) in line with
the settlement and/or restructuring of certain counters
during the year. Nedbank Group’s advances portfolio has an
approximate 60% weighting in wholesale advances where
specific provisions are determined on a deal-by-deal basis.
Most wholesale advances are secured by collateral, including
deep security pools held against our commercial-property-
finance portfolio. This creates a relatively lower loss given
default and, as a function of this, lower specific coverage
levels in CIB and consequently at group level.

The portfolio coverage ratio in CIB remained stable at 0,29%
and, since June 2016, central portfolio provisions increased by
R150m to R500m, remaining at the same level at year-end as
in 2015. Additional overlays held in RBB decreased to R654m
(2015: R699m), mainly due to a reduction in overlays held for
the unsecured-debt portfolio. These provisions take into
account our assessment of the risks in some of the more
stressed sectors of the economy and other risks that have
been incurred but have not yet emerged.

Nedbank’s International Financial Reporting Standard
(IFRS) 9 implementation programme is on track and we are
well positioned for a parallel run in 2017. While we expect a
transitional increase in balance sheet provisions in line with
the requirements of the standard, this is not anticipated to
have a significant impact on our capital adequacy levels.

Non-interest revenue
NIR grew 8,1% to R23 503m (2015: R21 748m), primarily
driven by:

– Commission and fee income growth of 6,8% to R16 686m
(2015: R15 627m), following gains in quality retail clients
along with improved client coverage in CIB as the
integration continues to deliver revenue benefits.

– Insurance income decreasing 5,6% to R1 727m (2015:
R1 830m) as a result of higher weather-related claims.

– Trading income increasing 18,8% to R3 761m (2015:
R3 167m) from higher market volatility, good client flows
and deeper client penetration in CIB.

– Private-equity income increasing to R929m (2015: R886m)
due to positive revaluations in certain entities, partly offset
by lower profits realised.

Expenses
Expenses continue to be managed within expectations and
increased 8,6% to R28 366m (2015: R26 110m), mainly as a
result of:

– Staff-related costs increasing 8,6%, consisting of –

– 7,4% growth in remuneration and other staff costs,
driven by a 6,3% average annual salary increase and
additional staff hires, mainly for regulatory change
programmes;

– a 10,5% increase in short-term incentives in line with key
performance metrics in managed operations, offset by
the impact of ETI; and

– a 33,0% increase in long-term incentives as we perform
better against the group’s corporate performance
targets, thereby increasing expected vesting levels.

– Computer processing costs increasing 14,2% to R4 047m,
including amortisation costs that increased 11,3% to
R799m following the capitalisation of IT projects and
branch reformatting costs.

– Fees and insurance costs being 8,5% higher at R3 040m
following increased volumes of revenue-generating
activities such as cash handling and card issuing
and acquiring.

The group’s growth in revenue of 9,4% exceeded growth in
expenses. Excluding ETI, the JAWS ratio from managed
operations was positive at 0,8% (2015: -0,7%). The efficiency
ratio increased to 56,9% (2015: 56,2%), while this metric
improved to 56,4% (2015: 56,8%) if ETI is excluded.

Earnings from associates*
The earnings in associates decreased to a loss of R105m (2015:
R871m profit). This mainly comprised the equity-accounting of
our 21,2% share of ETI’s Q4 2015 loss of R676m, which was
partly offset by our share of profits for the nine-month period
ended 30 September 2016 of R551m, in line with our policy of
accounting for ETI earnings a quarter in arrear. The total
headline earnings impact of ETI for 2016 was a negative
R374m, including the R249m impact of funding costs.

The carrying value of Nedbank Group’s strategic investment
in ETI decreased from R7,8bn to R4,0bn during the year, due
to a combination of foreign currency translation losses arising
from the naira devaluation and therefore ETI’s balance sheet
decreasing in US dollars, the rand strengthening against the
US dollar, our share of losses incurred by ETI during the
12 months to 30 September 2016, as well as an impairment
provision of R1,0bn.

The market value of the group’s investment in ETI, based on
its quoted share price, was R2,4bn on 31 December 2016 and
R2,1bn on 24 February 2017. The ETI share trades in low
volumes, given its low free float, while also being listed in an
illiquid market. The difference between market value and
carrying value is significant and prolonged, which has
represented evidence of an impairment indicator at
31 December 2016.

Where there is an impairment indicator, IFRS determines that
an impairment test be computed, which compares the value
in use (VIU) and the carrying value of the investment. The
computation of the VIU in accordance with IFRS is subject to
significant judgement as it is based on, inter alia, economic
estimates, macro assumptions and the discounting of future
cashflow estimates. This is particularly complicated in the
current economic environment in many of the jurisdictions in
which ETI operates and with the limited public information
available. As a result, management has computed the VIU
based on a number of scenarios by taking into account
publicly available information. Based on the results of this VIU
calculation, management determined that an impairment
provision of R1,0bn was appropriate. This has reduced the
carrying value of the group’s investment to R4,0bn at
31 December 2016.

This calculation is required to be revisited at each reporting
period where the indicators of impairment would be
reconsidered and the VIU calculation would be reassessed
taking into account any future changes in estimates and
assumptions. Any significant changes after this reporting
period that require the VIU calculation or underlying carrying
value of the ETI investment to be revisited could result in a
further impairment or a release of the current R1,0bn
impairment provision. The impairment was recorded within
‘non-trading and capital’ items and does not impact headline
earnings. Regulatory capital was not impacted as the
impairment amount was less than the full threshold
deduction already taken against regulatory capital.

The group’s strategic investment in ETI has been impaired in
accordance with the IFRS accounting considerations and the
main driver of this was the significant change in the economic
estimates and macro assumptions from Nigeria. ETI remains
an important long-term investment for Nedbank, providing
our clients with a pan African transactional banking network
across 39 countries and access to dealflow in Central and
West Africa since its acquisition in 2014. We remain
supportive of ETI’s endeavours of delivering an ROE in excess
of its COE in due course. Conditions in the key markets in
which ETI operates are currently expected to remain difficult
in 2017, before improving in 2018 and beyond.

STATEMENT OF FINANCIAL POSITION
Capital
The group continued to strengthen its capital position and
we operated well within and/or above our internal capital
adequacy targets. Our tier 1 ratio improved to 13,0% (2016:
12,0%) as a result of strong organic capital generation and
the issue of R2,0bn of additional tier 1 capital. Initiatives for
risk-weighted asset optimisation in certain retail portfolios
provided further support.

The group’s total capital ratio was further strengthened with
the successful issuance of R2,0bn of tier 2 capital
instruments.
Internal
Dec Jun Dec target Regulatory
Basel III 2016 2016 2015 range minimum(2)
CET1(1) ratio 12,1 11,6 11,3 10,5 – 12,5 6,875
Tier 1 ratio 13,0 12,5 12,0 > 12,0 8,375
Total capital
ratio 15,3 14,5 14,1 > 14,0 10,375

(Ratios calculated include unappropriated profits.)
(1) Common equity tier 1.
(2) The Basel III regulatory requirements are being phased in between 2013
and 2019, and exclude any idiosyncratic or systemically important bank
minimum requirements.

Our strong capital base supports our dividend cover of
2,00 times, which recognises our capacity to generate
internal capital in the economic environment projected in our
business plans and takes into account that our approximate
20% share of associate earnings or losses from ETI does not
impact regulatory capital.

Funding and liquidity
Optimising our funding profile and maintaining a strong
liquidity position remain priorities for the group in the current
environment.

The group’s three-month average long-term funding ratio
improved to 29,6% for the fourth quarter of 2016
(December 2015: quarterly average of 28,7%), supported by
growth in Nedbank Retail Savings Bonds of R4,7bn to R19,2bn
and the successful issue of R10,8bn in senior unsecured debt.
Our funding profile benefited from our market share in the
medium-to-longer-term wholesale funding buckets, which
reduced our LCR HQLA requirements and consequently, the
all-in total cost of wholesale funding.

The group’s quarterly average LCR of 109,3%
(December 2015: 88,5%) exceeded the minimum regulatory
requirement of 70% in 2016 and 80% from 1 January 2017. In
addition, the group maintained appropriate operational
buffers to absorb seasonal and cyclical volatility in this ratio.
We will continue to do this as we proactively position our
balance sheet during the phase-in period as the LCR
regulatory requirement increases by 10% per annum to 100%
by 1 January 2019.

Nedbank Group Limited Dec Jun Dec
LCR 2016 2016 2015

HQLA (Rm) 137 350 127 114 117 997
Net cash outflows (Rm) 125 692 136 469 133 272
Liquidity coverage ratio (%)(3) 109,3 93,1 88,5
Regulatory minimum (%) 70,0 70,0 60,0

(3) Average for the quarter.

Further details on the LCR are available in the table section
of the Securities of Exchange News Service (SENS)
announcement.

Nedbank’s portfolio of LCR compliant HQLA increased to a
quarterly average of R137,4bn (December 2015: quarterly
average R118,0bn). Together with our portfolio of quick-liquidity
sources, the total available quick liquidity amounted to R180,4bn
(2015: R160,7bn), representing 18,7% of total assets.

SARB released a directive on 8 August 2016 confirming that
the available stable funding factor applicable to wholesale
deposits in the 0-to-6-month bucket will be increased from
0% to 35% to better reflect the actual stability of these
deposits in the SA context. Taking cognisance of the finalised
Basel Committee on Banking Supervision (BCBS) NSFR
standard and the directive issued by SARB, Nedbank is
already compliant with the minimum requirements that will
become effective on 1 January 2018, as our NSFR on a pro
forma basis, at 31 December 2016 was above 100%.
The remaining key focus areas relating to the NSFR are
finalising a number of minor interpretational matters and
ensuring that compliance is achieved within the context of
balance sheet optimisation.

Loans and advances
Loans and advances increased 3,7% to R707,1bn (2015: R681,6bn).
Advances growth continued to be led by wholesale banking,
although the rate of growth slowed down while growth in retail
advances has remained relatively stable.

Loans and advances by cluster are as follows:

% Dec Dec
Rm change 2016 2015

CIB 4,1 370 199 355 784
Banking activities 4,2 335 113 321 699
Trading activities 2,9 35 086 34 085
RBB 3,6 289 882 279 929
Wealth 1,3 28 577 28 206
Rest of Africa 18,6 19 582 16 515
Centre > (100,0) (1 163) 1 198
Group 3,7 707 077 681 632

CIB’s advances growth was mostly from commercial-
mortgage advances increasing by 12,1% and term loans by
10,5% on the back of a good deal pipeline. Our leading
market share of 42% in commercial mortgages continued to
be underpinned by a strong client base and a large, secure
asset pool.

Advances growth in RBB was driven by MFC, Personal Loans
and Card growing ahead of the industry, while Home Loans
grew at market levels. MFC’s growth of 7,7% and the increase
in Personal Loans, Card and Home Loans of 7,7%, 5,9% and
2,4% respectively are evidence of the progress made with our
strategy of increasing cross-sell activities and doing more
business with our clients, while not relaxing credit criteria.

Advances growth in the Rest of Africa Cluster was driven by
new-business flows and the consolidation of our acquisition
of Banco Único from October 2016. Excluding Banco Único,
growth was 4,7%.

Deposits
Deposits grew 4,9% to R761,5bn (2015: R725,9bn), while
total liabilities increased 4,4% to R884,3bn (2015: R847,0bn).
The loan-to-deposit ratio improved to 92,8%
(December 2016: 93,9%).

The group continues to actively enhance its deposit and
transactional banking franchise through innovative and
competitive products. Our focus is on growing household and
commercial deposits within the structure of the SA banking
sector, which creates a large proportion of institutional
funding in the system. Good progress was made against our
funding strategy, with RBB deposits up 9,7% to R272,2bn
(2015: R248,1bn) and our household deposit market share
increasing to 18,7% in 2016 (2015: 18,4%), supported by
market share gains in current accounts to 19,3% in 2016
(2015: 18,4%). Growth took place across most deposit
categories, with our current accounts increasing 9,3%, call
accounts and term deposits 6,0%, fixed deposits 7,0%, and
cash management deposits by 9,7%. This growth, together
with that of negotiable certificates of deposit and other
structured deposits, reduced the proportion of more
expensive foreign currency funding.

Group strategic focus
Our five strategic focus areas were refined in 2016 and
strategic enablers introduced to ensure that we deliver on our
financial targets of increasing our ROE, excluding goodwill,
closer to our medium-to-long-term target of COE plus 5%
(currently estimated around 19%) and reducing our cost-to-
income ratio from 57,0% to within our medium-to-long-term
target of 50 – 53%. Good progress continued to be made in
these key areas.

– Delivering innovative market-leading client experiences.
We launched the competitive Nedbank Pay-as-you-use
Account; MyPocket™ – a savings pocket linked to
transactional accounts with immediate access to cash;
Nedbank GAP Access™ – a cash advance solution for
merchants based on their transaction flows; Masterpass™
– a mobile payment platform in partnership with
MasterCard®; standalone prepaid functionality for airtime,
SMS bundles, data bundles and electricity; contactless
cards – incorporating tap-and-go card acceptance and
transactional banking; and ‘Interactive Teller’ – allowing
transactions to be performed through a video channel that
is linked to a teller located in our contact centre. In addition,
a new client relationship management capability enhanced
the contact centre experience, increasing volumes by 8% a
year. Membership of our Greenbacks rewards programme
increased 20%, with redemption values increasing 18%.
Digitally enabled and active retail clients grew strongly,
driving up the value of Nedbank App Suite™ transactions
60% to R25bn. To date 44% of our outlets have been
converted to new-format branches and we plan to have
63% of all outlets converted by 2018. These outlets are
smaller, with fewer staff, and are more digitally focused
than traditional branches. Our Wealth Cluster launched the
Nedgroup Investments Global Property Fund, expanding our
Best of Breed™ product range. Our digital client value
proposition was enhanced through the launch of contracts
for difference (CFDs) on our online stockbroking platform;
new digital self-service functionality; QuoteMe, offering
funeral and personal-accident solutions as well as funeral
policy servicing through video capability at all video-enabled
Nedbank branches.

– Growing our transactional banking franchise faster than the
market. Nedbank’s retail franchise attracted 3,0%
additional main-banked clients, within a total client base of
7,4m, translating into retail transactional NIR growth of
8,7%. Altogether 69,7% of our retail main-banked clients
have more than two other products. Our transactional
banking progress was reflected in market share gains in
household and transactional deposits to 18,7% and 19,4%
respectively. The CIB integrated model enabled deeper
client penetration and increased cross-sell, generating
39 primary-bank client wins. CIB’s leadership in key
specialist areas supported NIR growth, which was
acknowledged by CIB winning nine of the 32 Spire awards
for excellence across the commodity derivatives, currency
derivatives, fixed-income derivatives and bond markets.

– Being operationally excellent in all we do. Cost discipline
remains an imperative, with ongoing initiatives such as our
strategy to decrease the number of core systems from
250 to 60, of which 21 have been decommissioned in 2016,
bringing the total decommissioned to 106; the elimination
of duplicative processes, the reduction of the cost to serve
and acquire clients, as well as the reduction of floor space in
RBB by 30 000 m² by 2020, of which 18 743 m² has been
achieved since 2014. Nedbank Wealth made good progress
towards implementing a single policy administration system
in Insurance, which will support operational excellence. We
remain on track for delivery by the Old Mutual Group of the
full target of R1bn of pretax run rate synergies in 2017, of
which approximately 30% should accrue to Nedbank. To
date this has amounted to over R250m for Nedbank, driven
largely by procurement and technology services. In 2016 we
realised R599m in cost-efficiencies.

– Managing scarce resources to optimise economic outcomes.
We maintained our focus on growing activities that
generate EP, such as growing transactional deposits, with
current accounts up 9,3%; increasing transactional banking
activity, with commission and fees up 6,8%; and achieving
earnings growth of 15,5% in CIB and 11,2% in RBB. Our
selective origination of personal loans, home loans and
commercial-property finance has proactively limited
downside risk in this challenging operating climate,
enabling a CLR of 68 bps, below the mid-point of our TTC
target range. At the same time our balance sheet metrics
remain strong and we continue to deliver good
dividend growth.

– Providing our clients with access to the best financial
services network in Africa. The macroeconomic environment
in the rest of Africa remains challenging due to slowing
economic growth, foreign exchange and liquidity shortages,
and increasing regulatory pressures across a number of
jurisdictions.

– In Central and West Africa, since the establishment of
our alliance with Ecobank, 192 accounts have been
opened in 25 countries for 82 of our wholesale clients
that bank with Ecobank. We work closely with Ecobank
on joint pipeline deals in the power and infrastructure
sectors, and opportunities in trade and commodity
finance.

– In the SADC and East Africa we successfully
implemented our Flexcube core banking system in
Namibia, Swaziland and Lesotho, and we continued to
launch new products and grow our distribution
footprint. Our shareholding in Banco Único increased by
11% to 50% plus one share in October 2016 as a
progression of the 2014 transaction at a cost of
approximately R90m.

Despite challenging macroeconomic conditions, which are likely
to remain for 2017, the long-term growth potential of financial
services in the rest of Africa cannot be overlooked. We
therefore remain committed to our strategy and investments
in the rest of Africa and continue to support ETI as our partner
in Central and West Africa. ETI provides our clients with a
pan-African transactional banking network across 39 countries
and is a strategic investment for the group. ETI is targeting an
ROE in excess of its COE in the medium to long term, and our
21,2% shareholding offers our shareholders the opportunity to
participate in this growth over time.

In 2016 we introduced a series of strategic enablers to
facilitate delivery in respect of our strategic focus areas and
the achievement of our targets by changing the way in which
we operate. These include:

– People 2020 – aimed at transforming our leadership,
culture and talent capability to enable delivery of our
strategy through our people.

– Brand 2020 – building a distinctive and compelling brand
that will cause disruption, give us greater personality and
enhance the belief our stakeholders have in Nedbank.

– Managed Evolution and Digital Fast Lane – an innovative
technology transformation creating an agile digital
platform.

– Governance and regulatory change – leveraging risk
management to be a strategic and competitive
differentiator.

– Fair Share 2030 – guiding the creation of financial
solutions that deliver on our purpose and making a real
difference in society.

– Leading transformation – actively promoting a globally
competitive financial sector while creating a more
equitable society.

At the same time, to support strategic delivery further, we
initiated an operating-model review in the latter part of 2016.
The revised model, which we expect to begin implementing in
2017, will enable us to develop greater agility with a view to
innovating quicker and responding to disruptive threats
faster, optimally addressing new-client requirements and
providing best-in-class client experiences, and creating an
enterprise-wide capability with the client at the centre of all
we do. In addition, we aim to organise ourselves, our data and
data analytics and IT to enable differentiation in our clients’
universe, to respond more effectively to regulatory change
and to improve our ability to execute our strategy more
effectively. Collectively these activities are currently expected
to generate approximately R1,0bn of pretax benefits by 2019
and will support our ability to meet our medium-to-long-term
targeted cost-to-income ratio of 50 – 53%.

Old Mutual plc managed separation
Following the Old Mutual plc (OM) and Nedbank Group SENS
announcements released on 28 June 2016, the managed-
separation process was presented at the OM Capital Markets
event in London on 11 October 2016.

In summary, following the creation of a new SA holding
company, OM intends to distribute, in an orderly manner, a
significant proportion of the OM group’s shareholding in
Nedbank to the shareholders on the register of the new SA
holding company at that time, leaving Old Mutual Emerging
Markets (OMEM) as the principal business in the group.
Through its ownership of Old Mutual Life Assurance Company
SA the new SA group will retain an appropriate strategic
minority stake in Nedbank, with the exact level still to be
determined together with Nedbank, based on OMEM’s
commercial relationship with Nedbank and influenced by
the implications of the incoming Twin Peaks regulation.
The boards of directors and management teams of OM and
Nedbank continue to work closely together on these matters.
The announced target date for the material completion of
the managed separation is the end of 2018.

For Nedbank it is business as usual and OM’s decision will
have no impact on the strategy, and the day-to-day
management or operations, nor will there be an impact on
the staff and clients of Nedbank. Our engagements have
been at an arm’s length, overseen by independent board
structures. OM operates predominantly in the investment,
savings and insurance industry, which has little overlap with
banking. Our technology systems, brands and our businesses
have not been integrated and we compete in the areas of
wealth and asset management and personal Loans.

Our collaboration with OM to unlock R1,0bn of synergies from
the OM businesses in SA will continue to be underpinned by
OM’s strategic shareholding of Nedbank Group. We are fully
committed to working with Old Mutual South Africa to
deliver benefits from the synergies.

Economic outlook
SA’s economy is forecast to grow by around 1,1% in 2017 off
a low base. The risk to growth remains on the downside.
Inflation is expected to return to within SARB’s inflation
target range, resulting in our forecast of interest rates
decreasing in the second half of the year.

The improvement in the economy is expected to be
underpinned by a recovery in agriculture as the drought
recedes, and in mining and manufacturing as global
commodity prices drift higher. Corporate credit demand
should benefit from the recovery in these sectors, although
demand will remain contained by global growth, the
uncertain domestic policy environment, the pace of the rollout
of government’s renewable-energy programme and generally
difficult operating conditions.

Households will remain vulnerable, with job creation and
wage growth unlikely to bounce back quickly. Household
income and spending will therefore remain under pressure
in the first half of the year. However, some relief is expected
later in the year as inflation recedes and interest rates are
expected to decline. This should lead to household credit
demand improving moderately from low levels.

Government spending will be kept in check by the need to
reduce the budget deficit and contain the rise in government
debt to avoid a sovereign-rating downgrade.

Prospects
Our guidance on financial performance for the full year 2017
is as follows:

– Average interest-earning banking assets to increase
slightly ahead of nominal GDP growth.

– NIM to be slightly above the 2016 rebased level of 3,54%.

– CLR to increase, but to remain below the mid-point of our
target range of 60 – 100 bps.

– NIR, excluding fair-value adjustments, to grow at upper
single digits.

– Associate income, including ETI’s earnings likely to remain
volatile and uncertain (reported quarterly in arrear).

– Expenses to increase by mid-to-upper single digits.

Our financial guidance is for growth in DHEPS for the full
2017 year to be greater than growth in nominal GDP
(consumer price index plus GDP growth).

The outlook for our medium-to-long-term targets in 2017 is
as follows:

2016
Metric performance 2017 full-year outlook Medium-to-long-term targets

ROE (excluding goodwill) 16,5% Below target 5% above COE4

Growth in DHEPS 4,8% Below target > consumer price index + GDP growth + 5%

CLR 0,68% Increases but remains Between 0,6% and 1,0% of average banking advances
below mid-point of
target range

NIR-to-expense ratio 82,9% Below target > 85%

Efficiency ratio (including 56,9% Above target 50,0-53,0%
associate income)

Tier 1 capital adequacy ratio 13,0% Within target > 12,0%
(Basel III)

Economic capital Internal Capital Adequacy Assessment Process (ICAAP):
A debt rating, including 10% capital buffer

Dividend cover 2,00 times Within target range 1,75 – 2,25 times

(4) The COE is forecast at 14,1% in 2017.

Shareholders are advised that these forecasts are based on
organic earnings and our latest macroeconomic outlook,
and have not been reviewed or reported on by the
group’s auditors.

Board and group executive changes during 2016
Following his retirement from Old Mutual plc, Paul Hanratty
stepped down as a non-executive director of Nedbank Group
and Nedbank (‘companies’) on 12 March 2016. With effect
from 1 August 2016 Errol Kruger was appointed as an
independent non-executive director of the companies and
Rob Leith, the Director of Managed Separation at Old Mutual
plc, was appointed as a non-executive director of the
companies with effect from 13 October 2016.

As a result of increasing time constraints from their respective
overseas and local business commitments, Tom Boardman
and David Adomakoh have notified the boards of their
intention to resign as independent non-executive directors
with effect from the close of Nedbank Group’s Annual
General Meeting on Thursday, 18 May 2017.

Ciko Thomas was appointed Managing Executive of Nedbank
RBB with effect from 1 April 2016 following the early
retirement of Philip Wessels. Ciko has been a part of the RBB
leadership team and a member of the Group Executive
Committee for the past six years. Sandile Shabalala resigned
as Managing Executive of Business Banking and as a member
of our Group Executive Committee with effect from
2 September 2016.

Accounting policies*
Nedbank Group is a company domiciled in SA. The summary
consolidated financial results of the group at and for the year
ended 31 December 2016 comprise the company and its
subsidiaries (‘group’) and the group’s interests in associates
and joint arrangements.

The summary consolidated financial statements contained in
the SENS announcement have been extracted from the
audited consolidated financial statements. The summary
consolidated financial statements have been prepared in
accordance with the provisions of the JSE Listings
Requirements for preliminary reports and the Companies Act
applicable to summary financial statements. The JSE Listings
Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the
measurement and recognition requirements of IFRS, the
South African Institute of Chartered Accountants Financial
Reporting Guides as issued by the Accounting Practices
Committee, and Financial Pronouncements as issued by
the Financial Reporting Standards Council and also, as a
minimum, to contain the disclosure required by International
Accounting Standard 34: Interim Financial Reporting.
The accounting policies applied in the preparation of the
consolidated financial statements, from which the summary
consolidated financial statements were derived, are in terms
of IFRS and are consistent with the accounting policies that
were applied in the preparation of the previous consolidated
financial statements.

The summary consolidated financial results have been
prepared under the supervision of Raisibe Morathi CA(SA),
the Chief Financial Officer. The directors take full
responsibility for the preparation of the summary
consolidated financial results and for correctly extracting
the financial information from those underlying audited
consolidated financial statements for inclusion in the 2016
year-end results booklet and SENS announcement.

EVENTS AFTER THE REPORTING PERIOD*
There are no material events after the reporting period to
report on.

Audited summary consolidated financial statements – independent auditor’s
opinion

The summary consolidated financial statements comprise
the summary consolidated statement of financial position at
31 December 2016, summary consolidated statement of
comprehensive income, summary consolidated statement of
changes in equity and summary consolidated statement of
cashflows for the year then ended and selected explanatory
notes, which are indicated by the symbol*.

These summary consolidated financial statements for the
year ended 31 December 2016 have been audited by KPMG Inc
and Deloitte & Touche, who expressed an unmodified opinion
thereon. The auditors also expressed an unmodified opinion
on the consolidated financial statements from which these
summary consolidated financial statements were derived.

A copy of the auditors’ report on the summary consolidated
financial statements and of the auditors’ report on the
consolidated financial statements are available for inspection
at the company’s registered office, together with the
consolidated financial statements identified in the respective
auditors’ reports.

The auditors’ report does not necessarily report on all of the
information contained in the 2016 year-end results booklet
and SENS announcement. Shareholders are therefore
advised that, to obtain a full understanding of the nature of
the auditors’ engagement, they should obtain a copy of the
auditors’ report, together with the accompanying financial
statements, from Nedbank Group’s registered office.

Forward-looking statements
This 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 global, national and regional
economic conditions; levels of securities markets; interest
rates; exchange 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 declaration
Notice is hereby given that a final dividend of 630 cents per
ordinary share has been declared, payable to shareholders for
the year ended 31 December 2016. The dividend has been
declared out of income reserves.

The dividend will be subject to a dividend withholding tax rate
of 20% (applicable in SA) or 126 cents per ordinary share,
resulting in a net dividend of 504 cents per ordinary share,
unless the shareholder is exempt from paying dividend tax or
is entitled to a reduced rate in terms of an applicable double-
tax agreement. In 2015 and 2016, the dividend withholding
tax rate was 15% and this increased to 20% on
22 February 2017.

Nedbank Group’s tax reference number is 9375/082/71/7 and
the number of ordinary shares in issue at the date of
declaration is 495 865 721.

In accordance with the provisions of Strate, the electronic
settlement and custody system used by JSE Ltd, the relevant
dates for the dividend are as follows:

Event Date

Last day to trade (cum Monday, 10 April 2017
dividend)
Shares commence trading Tuesday, 11 April 2017
(ex dividend)
Record date (date Thursday, 13 April 2017
shareholders recorded
in books)
Payment date Tuesday, 18 April 2017

Share certificates may not be dematerialised or
rematerialised between Tuesday, 11 April 2017, and Thursday,
13 April 2017, both days inclusive.

On Tuesday, 18 April 2017, the dividend will be electronically
transferred to the bank accounts of shareholders. Holders
of dematerialised shares will have their accounts credited at
their participant or broker on Tuesday, 18 April 2017.

The above dates are subject to change. Any changes will be
published on SENS and in the press.

For and on behalf of the board

Vassi Naidoo Mike Brown
Chairman Chief Executive

28 February 2017

Financial highlights
at
31 December 31 December
Change 2016 2015
% (Audited) (Audited)
Statistics
Number of shares listed 0,3 m 495,9 494,4
Number of shares in issue, excluding shares held by group entities 0,4 m 478,4 476,6
Weighted-average number of shares 0,8 m 477,8 474,2
Diluted weighted-average number of shares 1,0 m 487,9 483,1
Preprovisioning operating profit 4,4 Rm 20 004 19 170
Economic profit(2) (38,0) Rm 1 565 2 525
Headline earnings per share 5,1 cents 2 400 2 284
Diluted headline earnings per share 4,8 cents 2 350 2 242
Ordinary dividends declared per share 8,4 cents 1 200 1 107
Interim 6,1 cents 570 537
Final 10,5 cents 630 570
Ordinary dividends paid per share 3,2 cents 1 140 1 105
Dividend cover (3,1) times 2,00 2,06
Net asset value per share 0,9 cents 15 830 15 685
Tangible net asset value per share (0,5) cents 13 723 13 794
Closing share price 26,3 cents 23 813 18 861
Price/earnings ratio historical 9,9 8,3
Market capitalisation 26,7 Rbn 118,1 93,2
Number of employees (permanent staff)(2) 3,5 32 401 31 312
Number of employees (permanent and temporary staff)(2) 3,3 32 746 31 689
Key ratios (%)
Return on ordinary shareholders’ equity (ROE)(2) 15,3 15,7
ROE, excluding goodwill(2) 16,5 17,0
Return on tangible equity(2) 17,6 18,1
Return on total assets (ROA)(2) 1,23 1,25
Return on average risk-weighted assets(2) 2,23 2,30
Net interest income to average interest-earning banking assets(2) 3,41 3,30
Credit loss ratio – banking advances(2) 0,68 0,77
Gross operating income growth rate less expense growth rate (JAWS
ratio) (1,5) 0,6
Non-interest revenue to total operating expenses 82,9 83,3
Non-interest revenue to total income 47,1 47,7
Efficiency ratio 56,9 56,1
Effective taxation rate 24,9 24,0
Group capital adequacy ratios (including unappropriated profits):(2)
– Common equity tier 1 12,1 11,3
– Tier 1 13,0 12,0
– Total 15,3 14,1
Statement of financial position statistics (Rm)
Total equity attributable to equity holders of the parent 1,3 75 733 74 754
Total equity 3,8 81 711 78 751
Amounts owed to depositors 4,9 761 542 725 851
Loans and advances 3,7 707 077 681 632
Gross 3,8 719 226 693 043
Impairment of loans and advances 6,5 (12 149) (11 411)
Total assets administered by the group 4,8 1 239 349 1 183 021
Total assets 4,4 966 022 925 726
Assets under management 6,2 273 327 257 295
Life insurance embedded value(2) 3,1 2 740 2 657
Life insurance value of new business(2) 61,5 399 247

(2) These metrics have not been audited by the group’s auditors.

Audited summary consolidated financial statements
for the year ended 31 December 2016

Summary consolidated statement of comprehensive income
31 December 31 December
2016 2015
Change (Audited) (Audited)
% Rm Rm

Interest and similar income 21,7 73 395 60 289
Interest expense and similar charges 29,0 46 969 36 404
Net interest income 10,6 26 426 23 885
Impairments charge on loans and advances (4,9) 4 554 4 789
Income from lending activities 14,5 21 872 19 096
Non-interest revenue 8,1 23 503 21 748
Operating income 11,1 45 375 40 844
Total operating expenses 8,6 28 366 26 110
Indirect taxation 18,4 927 783
Profit from operations before non-trading and capital items 15,3 16 082 13 951
Non-trading and capital items > 100 (1 363) (141)
Profit from operations 6,6 14 719 13 810
Share of (losses)/profits of associate companies and joint
arrangements < -100 (105) 871
Profit before direct taxation (0,5) 14 614 14 681
Total direct taxation 12,4 3 955 3 519
Direct taxation 3 985 3 550
Taxation on non-headline earnings items (30) (31)
Profit for the year (4,5) 10 659 11 162
Other comprehensive (losses)/income net of taxation 100 1 363 1 333 141 110
IFRS 3 – Fair-value loss on remeasurement of previously held
interest 15 15
IAS 16 – Loss on disposal of property and equipment 44 44 35 35
IAS 21 – Recycled foreign currency translation loss – Banco
Único, SA 203 203
IAS 28 – Loss on dilution of shareholding in ETI 17 17
IAS 28 – Impairment provision for ETI 1 000 1 000
IAS 36 – Impairment of property and equipment 8 7
IAS 38/IAS 39 – Impairment of intangible and available-for-
sale assets 141 99 110 80
IAS 39 – Profit on sale of available-for-sale financial assets (63) (51) (12) (12)
IAS 40 – Loss on disposal of investment properties 6 6
Headline earnings 5,9 11 465 10 831

Summary consolidated statement of financial position
at
31 December 31 December
2016 2015
Change (Audited) (Audited)
% Rm Rm

Assets
Cash and cash equivalents 15,5 26 384 22 840
Other short-term securities 12,0 84 679 75 614
Derivative financial instruments (42,2) 17 633 30 488
Government and other securities 18,6 51 048 43 060
Loans and advances 3,7 707 077 681 632
Other assets 56,7 14 077 8 984
Current taxation assets (44,4) 574 1 032
Investment securities 8,1 14 225 13 155
Non-current assets held for sale > 100 287 2
Investments in private-equity associates, associate companies and joint arrangements (31,4) 6 567 9 579
Deferred taxation assets > 100 494 227
Investment property (31,3) 22 32
Property and equipment 2,1 8 969 8 784
Long-term employee benefit assets 2,9 5 203 5 055
Mandatory reserve deposits with central banks 15,2 18 700 16 232
Intangible assets 11,9 10 083 9 010
Total assets 4,4 966 022 925 726
Equity and liabilities
Ordinary share capital 0,2 478 477
Ordinary share premium 2,7 18 043 17 569
Reserves 0,9 57 212 56 708
Total equity attributable to equity holders of the parent 1,3 75 733 74 754
Non-controlling interest attributable to:
– Ordinary shareholders 73,4 756 436
– Preference shareholders (9,5) 3 222 3 561
– Additional tier 1 capital instruments 2 000
Total equity 3,8 81 711 78 751
Derivative financial instruments (60,5) 13 296 33 628
Amounts owed to depositors 4,9 761 542 725 851
Provisions and other liabilities 49,2 34 667 23 240
Current taxation liabilities (48,1) 214 412
Deferred taxation liabilities (32,0) 804 1 182
Long-term employee benefit liabilities 12,2 3 448 3 074
Investment contract liabilities 39,6 15 342 10 988
Insurance contract liabilities (19,2) 2 922 3 618
Long-term debt instruments 15,8 52 076 44 982
Total liabilities 4,4 884 311 846 975
Total equity and liabilities 4,4 966 022 925 726

Summary consolidated statement of changes in equity
Non-
controlling
Total equity Non- Non- interest
attributable controlling controlling attributable
to interest interest to additional
equity attributable attributable tier 1
holders of to ordinary to preference capital Total
the parent shareholders shareholders instruments equity
Rm Rm Rm Rm Rm

Audited balance at 31 December 2014 67 024 326 3 561 70 911
Dividend to shareholders (5 395) (10) (5 405)
Preference share dividend (371) (371)
Issues of shares net of expenses 1 023 1 023
Shares delisted in terms of BEE transaction (336) (336)
Shares (acquired)/no longer held by group entities and
BEE trusts (463) (463)
Total comprehensive income for the year 12 820 120 371 13 311
Share-based payment reserve movement 82 82
Other movements (1) (1)
Audited balance at 31 December 2015 74 754 436 3 561 – 78 751
Additional tier 1 capital instruments issued 2 000 2 000
Dividend to shareholders (5 587) (11) (5 598)
Additional tier 1 capital instruments interest paid (78) (78)
Preference share dividend (361) (361)
Issues of shares net of expenses 276 276
Shares (acquired)/no longer held by group entities and
BEE trusts 199 199
Total comprehensive income for the year 6 183 96 361 78 6 718
Share-based payment reserve movement 136 136
Preference shares held by group entities (339) (339)
Acquisition of shareholding in subsidiary 239 239
Transactions with non-controlling shareholders (223) (223)
Buyout of non-controlling interests (6) (6)
Regulatory risk reserve provision (8) 2 (6)
Other movements 3 3
Audited balance at 31 December 2016 75 733 756 3 222 2 000 81 711

Summary consolidated statement of cashflows
for the year ended
31 December 31 December
2016 2015
(Audited) (Audited)
Rm Rm

Cash generated by operations 24 827 22 455
Change in funds for operating activities (15 473) (13 602)
Net cash from operating activities before taxation 9 354 8 853
Taxation paid (5 065) (4 400)
Cashflows from operating activities 4 289 4 453
Cashflows (utilised by)/from investing activities (3 004) 2 867
Cashflows from financing activities 3 536 3 802
Effects of exchange rate changes on opening cash and cash equivalents (excluding foreign borrowings) 1 191 (300)
Net increase in cash and cash equivalents 6 012 10 822
Cash and cash equivalents at the beginning of the year(3) 39 072 28 250
Cash and cash equivalents at the end of the year(3) 45 084 39 072
(3) Including mandatory reserve deposits with central banks.

Summary segmental reporting
for the year ended

31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm
Operating income/ Headline earnings/
Total assets Total liabilities (losses) (losses)

Nedbank Corporate and
Investment Banking 491 480 470 567 463 018 447 471 13 649 12 101 6 014 5 208
Nedbank Retail and
Business Banking 304 842 292 560 278 588 265 636 25 810 23 715 4 960 4 460
Nedbank Wealth 62 042 61 322 58 655 58 588 4 362 4 320 1 192 1 134
Rest of Africa 36 189 32 941 28 247 26 142 1 713 1 358 (287) 691
Centre 71 469 68 336 55 803 49 138 (159) (650) (414) (662)
Total 966 022 925 726 884 311 846 975 45 375 40 844 11 465 10 831

Contingent liabilities and commitments
for the year ended

Contingent liabilities and undrawn facilities
31 December 31 December
2016 2015
(Audited) (Audited)
at Rm Rm

Guarantees on behalf of clients 16 316 27 300
Letters of credit and discounting transactions 3 432 4 463
Irrevocable unutilised facilities and other 103 163 103 519
122 911 135 282

The group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. Provisions are made
for known liabilities that are expected to materialise. Possible obligations and known liabilities where no reliable estimate can be made or
it is considered improbable that an outflow would result are reported as contingent liabilities. This is in accordance with IAS 37: Provisions,
Contingent Liabilities and Contingent Assets.

There are a number of legal or potential claims against Nedbank Group Ltd and its subsidiary companies, the outcome of which
cannot at present be foreseen.

Commitments
CAPITAL EXPENDITURE APPROVED BY DIRECTORS
31 December 31 December
2016 2015
(Audited) (Audited)
at Rm Rm

Contracted 522 1 317
Not yet contracted 2 092 2 222
2 614 3 539

Funds to meet capital expenditure commitments will be provided from group resources. In addition, capital expenditure is incurred in
the normal course of business throughout the year.

Investments in private-equity associates, associate companies and joint arrangements
for the year ended

Investments in private-equity associates, associate companies and joint arrangements
31 December 31 December
2016 2015
(Audited) (Audited)
at Rm Rm

Listed associates(4) 3 978 7 808
Unlisted associates 2 467 1 320
Unlisted joint arrangements 122 451
6 567 9 579
(4) The group’s investment in Ecobank Transnational Incorporated (ETI) is recorded under listed associates.

Listed associates: ETI
Carrying value 3 978 7 808
Fair value of investment 2 438 6 916

Acquisition of subsidiary company

for the year ended

On 3 October 2016 the group acquired a further 10,9% share in Banco Único, SA to reach a controlling 50% plus one share
(2015: 38,3% share). The acquiree is a banking entity in Mozambique and the acquisition, in line with the group’s strategy of
expanding into the rest of Africa, was made by purchasing Banco Único, SA shares from a third party.
31 December
2016
(Audited)
Acquisition-date fair value Rm

Acquisition-date fair value of consideration held5 203
Cash 90
Share of non-controlling interests6 238
Capitalised derivative financial instrument (36)
Acquisition-date fair value of consideration transferred 495

(5) A R15m loss was recognised in non-trading and capital items as a result of remeasuring to fair value the equity interest in Banco Único, SA held by the group before
the business combination.

(6) The group elected to measure non-controlling interests at the proportionate share of the fair value of net assets.
31 December
2016
(Audited)
Assets acquired and liabilities consumed as of the acquisition date Rm

Cash and cash equivalents and mandatory reserve deposits with central banks 508
Other short-term securities 132
Loans and advances 3 181
Other assets 24
Deferred taxation assets 44
Property and equipment 100
Intangible assets 139
Total assets acquired 4 128
Amounts owed to depositors 3 494
Provisions and other liabilities 108
Deferred taxation liabilities 42
Long-term debt instruments 8
Total liabilities consumed 3 652
Guarantees on behalf of clients 789
Letters of credit and discounting transactions 5
Total contingent liabilities recognised 794
There were no contingent consideration arrangements and indemnification assets recognised on the acquisition.
31 December
2016
(Audited)
Goodwill Rm

Goodwill recognised on acquisition 19
Foreign currency translation movements 2
Balance at the end of the year 21
The goodwill recognised at acquisition is attributable to the delivery of cost and revenue synergies that could not be linked to
identifiable intangible assets.
31 December
2016
(Audited)
Acquired receivables Rm

Gross contractual amount of loans and advances 3 293
Fair value of loans and advances 3 181
Best estimate of contractual cashflows not expected to be collected 112

Profit for the
Revenue(1) year
31 December 31 December
2016 2016
(Audited) (Audited)
Consolidated statement of comprehensive income Rm Rm

Amounts of the acquiree included in the consolidated statement of comprehensive income since
the acquisition date 115 44
Amounts of the combined entity in the consolidated statement of comprehensive income for the
year as though the acquisition occurred on 1 January 2016 B 50 271 10 684

(1) Revenue is calculated as net interest income plus non-interest revenue.

Fair-value hierarchy

FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
The fair value of a financial instrument is the price that would be received for the sale of an asset or paid for the transfer of a liability
in an orderly transaction between market participants at the measurement date. Underlying the definition of fair value is an
assumption that an entity is a going concern without any intention or need to liquidate, to curtail materially the scale of its
operations or to undertake a transaction on adverse terms. Fair value is not, therefore, the amount that an entity would receive or
pay in a forced transaction, involuntary liquidation or distressed sale.

The existence of published price quotations in an active market is the most reliable evidence of fair value and, where they exist, they
are used to measure the financial asset or financial liability. A market is considered to be active if transactions occur with sufficient
volumes and frequencies to provide pricing information on an ongoing basis. These quoted prices would generally be classified as
level 1 in terms of the fair-value hierarchy.

Where a quoted price does not represent fair value at the measurement date or where the market for a financial instrument is not
active, the group establishes fair value by using a valuation technique. These valuation techniques include reference to the current
fair value of another instrument that is substantially the same in nature, reference to the value of the assets of underlying business,
earnings multiples, discounted-cashflow analysis and various option pricing models. Valuation techniques applied by the group would
generally be classified as level 2 or level 3 in terms of the fair-value hierarchy. The determination of whether an instrument is
classified as level 2 or level 3 is dependent on the significance of observable inputs versus unobservable inputs in relation to the fair
value of the instrument. Inputs typically used in valuation techniques include discount rates, appropriate swap rates, volatility,
servicing costs, equity prices, commodity prices, counterparty credit risk, and the group’s own credit on financial liabilities.
The group has an established control framework for the measurement of fair value, which includes formalised review protocols for
the independent review and validation of fair values separate from the business unit entering into the transaction. The valuation
methodologies, techniques and inputs applied to the fair-value measurement of the financial instruments have been applied in a
manner consistent with that of the previous financial year.

FAIR-VALUE HIERARCHY
The financial instruments recognised at fair value have been categorised into the three input levels of the International Financial
Reporting Standards (IFRS) fair-value hierarchy as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2: Valuation techniques based on (directly or indirectly) market-observable inputs. Various factors influence the availability of
observable inputs. These factors may vary from product to product and change over time. Factors include the depth of activity in the
relevant market, the type of product, whether the product is new and not widely traded in the market, the maturity of market
modelling and the nature of the transaction (bespoke or generic).

Level 3: Valuation techniques based on significant inputs that are not observable. To the extent that a valuation is based on inputs
that are not market-observable the determination of the fair value can be more subjective, depending on the significance of the
unobservable inputs to the overall valuation. Unobservable inputs are determined on the basis of the best information available and
may include reference to similar instruments, similar maturities, appropriate proxies or other analytical techniques.

All fair values disclosed below are recurring in nature.

FINANCIAL ASSETS
Total financial assets
recognised at amortised Total financial assets Total financial assets Total financial assets
Total financial assets cost classified as level 1 classified as level 2 classified as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm
Cash and cash equivalents 45 084 39 072 45 084 39 072
Other short-term securities 84 679 75 614 33 184 32 862 488 667 51 007 42 085
Derivative financial instruments 17 633 30 488 49 99 17 547 30 371 37 18
Government and other securities 51 048 43 060 22 393 18 807 15 881 11 438 12 774 12 815
Loans and advances 707 077 681 632 610 858 582 454 5 890 60 90 252 99 085 77 33
Other assets 14 077 8 984 9 533 4 832 4 544 4 152
Investments in private-equity
associates, associate companies and
joint arrangements 2 357 1 162 2 357 1 162
Investment securities 14 225 13 155 35 448 13 098 12 016 1 092 691
936 180 893 167 721 052 678 027 26 887 16 864 184 678 196 372 3 563 1 904

FINANCIAL LIABILITIES
Total financial liabilities
recognised at amortised Total financial liabilities Total financial liabilities Total financial liabilities
Total financial liabilities cost classified as level 1 classified as level 2 classified as level 3
31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
Rm Rm Rm Rm Rm Rm Rm Rm Rm Rm

Derivative financial instruments 13 296 33 628 81 126 13 215 33 416 86

Amounts owed to depositors (7) 761 542 725 851 685 508 648 588 76 034 77 263
Provisions and other liabilities 33 267 21 942 11 738 7 988 20 810 13 724 389 230 330
Investment contract liabilities 15 342 10 988 15 342 10 988
Long-term debt instruments 52 076 44 982 51 775 44 581 156 301 245
875 523 837 391 749 021 701 157 20 891 14 006 105 281 122 142 330 86

(7) Amounts owed to depositors of R93 080m were included in the prior year as held-for-trading liabilities, whereas these instruments were classified and measured as financial liabilities at amortised cost. Accordingly, the held-for-trading
and financial liabilities at amortised cost categories have been restated to reflect the correct classification.

LEVEL 3 RECONCILIATION
31 December 2016 (Audited) Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
B Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Derivative financial instruments 18 19 37
Loans and advances 33 4 40 77
Investment securities 691 (28) 53 (34) 410 1 092
Investments in private-equity associates, associate companies and joint
arrangements 1 162 273 1 130 (208) 2 357
1 904 268 – 1 183 (242) 450 3 563
Financial liabilities
Derivative financial instruments 86 (8) (78) –
Provisions and other liabilities 32 298 330
86 24 – 298 (78) – 330

Gains/
(Losses)
Gains/ in other
Opening (Losses) comprehensive
balance at in profit for income for Closing
1 January the year the year Purchases Sales and Transfers in/ balance at
31 December 2015 (Audited) Rm Rm Rm and issues settlements (out) 31 December
Financial assets
Derivative financial instruments 18 18
Loans and advances 33 33
Investment securities 800 (36) 2 (75) 691
Investments in private-equity associates, associate companies and joint
arrangements 898 89 312 (137) 1 162
1 731 71 – 314 (212) – 1 904
Financial liabilities
Derivative financial instruments 20 66 86
20 66 – – – – 86

EFFECT OF CHANGES IN SIGNIFICANT UNOBSERVABLE ASSUMPTIONS TO REASONABLE POSSIBLE ALTERNATIVES
The fair-value measurement of financial instruments are, in certain circumstances, measured using valuation techniques that include assumptions that are not market-observable. Where
these scenarios apply, the group performs stress testing on the fair value of the relevant instruments. In performing the stress testing, appropriate levels for the unobservable-input
parameters are chosen so that they are consistent with prevailing market evidence and in line with the group’s approach to valuation control. The following information is intended to
illustrate the potential impact of the relative uncertainty in the fair value of financial instruments for which valuation is dependent on unobservable-input parameters and which are
classified as level 3 in the fair-value hierarchy. However, the disclosure is neither predictive nor indicative of future movements in fair value.

FINANCIAL ASSETS
Value per Favourable Unfavourable
statement change change
Variance in of financial in fair in fair
Significant fair value position value value
31 December 2016 (Audited) Valuation technique unobservable input % Rm Rm Rm
Derivative financial instruments Discounted cashflows Discount rates, EBITDA Between (12) and 9 37 3 (4)
Loans and advances Credit spreads and
Discounted cashflows discount rates Between (12) and 9 77 7 (9)
Investment securities Discounted cashflows, adjusted net Valuation multiples,
asset value, earnings multiples, third- correlations, volatilities
party valuations, dividend yields and credit spreads Between (12) and 9 1 092 103 (129)
Investments in private-equity associates,
associate companies and join
arrangements Discounted cashflows, earnings multiples Valuation multiples Between (12) and 9 2 357 222 (279)
Total financial assets classified as level 3 3 563 335 (421)

Financial liabilities
Provisions and other liabilities Discounted cash flow, earnings multiples Discount rates, forecasts Between (10) and 10 (330) (33) 33

Financial assets
Value per
statement of Favourable Unfavourable
Variance in financial change in fair change in fair
Significant fair value position value value
31 December 2015 (Audited) Valuation technique unobservable input % Rm Rm Rm
Derivative financial instruments Discounted-cashflow model, Black- Discount rates, risk-free
Scholes model and multiple valuation rates, volatilities, credit
techniques spreads and valuation
multiples Between (13) and 10 18 2 (2)
Loans and advances Discounted cashflows Credit spreads and
discount rates Between (13) and 10 33 3 (4)
Investment securities Discounted cashflows, adjusted net asset Valuation multiples,
value, earnings multiples, third-party correlations, volatilities and
valuations, dividend yields credit spreads Between (13) and 10 691 62 (77)
Investments in private-equity associates,
associate companies and joint arrangements Discounted cashflows, earnings multiples Valuation multiples Between (7) and 8 1 162 97 (109)
Total financial assets classified as level 3 1 904 164 (192)

Financial liabilities
Derivative financial instruments Discounted cashflows, earnings multiples Growth rates, cost of
equity and price to book Between (10) and 10 (86) 37 (33)

UNREALISED GAINS OR LOSSES
The unrealised gains or losses arising on instruments classified as level 3 include the following:

31 December 31 December
2016 2015
(Audited) (Audited)
Rm Rm
Private-equity gains 268 71
268 71

Summary of principal valuation techniques – level 2 instruments
The following table sets out the group’s principal valuation techniques used in determining the fair value of financial assets and
financial liabilities classified as level 2 in the fair-value hierarchy:

Assets Valuation technique Key inputs

Other short-term securities Discounted–cashflow model Discount rates
Derivative financial instruments Discounted–cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Government and other securities Discounted–cashflow model Discount rates
Loans and advances Discounted–cashflow model Interest rate curves
Investment securities Discounted–cashflow model Money market rates and interest rates
Adjusted net asset value Underlying price of market–traded
instruments
Dividend yield method Dividend growth rates
Liabilities
Derivative financial instruments Discounted–cashflow model Discount rates
Black-Scholes model Risk-free rate and volatilities
Multiple valuation techniques Valuation multiples
Amounts owed to depositors Discounted–cashflow model Discount rates
Provisions and other liabilities Discounted–cashflow model Discount rates
Investment contract liabilities Adjusted net asset value Underlying price of market–traded
instruments
Long-term debt instruments Discounted–cashflow model Discount rates

Assets and liabilities not measured at fair value for which fair value is disclosed
Certain financial instruments of the group are not carried at fair value, including those categorised as held to maturity, loans and
receivables and financial liabilities at amortised cost. The calculation of the fair value of these financial instruments incorporates the
group’s best estimate of the value at which these financial assets could be exchanged, or financial liabilities could be transferred,
between market participants at the measurement date. The group’s estimate of what fair value is does not necessarily represent the
amount for which the group would be able to sell the asset or transfer the respective financial liability in an involuntary liquidation or
distressed sale.

The fair values of these respective financial instruments at the reporting date detailed below are estimated only for the purpose of
IFRS disclosure, as follows:

Carrying
Rm value Fair value Level 1 Level 2 Level 3
31 December 2016 (Audited)
Financial assets 666 435 657 139 21 828 33 128 602 183
Other short-term securities 33 184 33 128 33 128
Government and other securities 22 393 21 828 21 828
Loans and advances 610 858 602 183 602 183

Financial liabilities 51 775 48 894 20 432 28 462 –
Long-term debt instruments 51 775 48 894 20 432 28 462

Carrying
Rm value Fair value Level 1 Level 2 Level 3
31 December 2015 (Audited)
Financial assets 634 123 628 792 17 415 32 709 578 668
Other short-term securities 32 862 32 709 32 709
Government and other securities 18 807 17 415 17 415
Loans and advances 582 454 578 668 578 668

Financial liabilities 44 581 42 933 24 269 18 664 –
Long-term debt instruments 44 581 42 933 24 269 18 664

There has been no significant changes in the methodolgy used to estimate the fair value of the above instruments during the year.

LOANS AND ADVANCES
Loans and advances that are not recognised at fair value principally comprise variable-rate financial assets. The interest rates on
these variable rate-financial assets are adjusted when the applicable benchmark interest rate changes.

Loans and advances are not actively traded in most markets and it is therefore not possible to determine the fair value of these
loans and advances using observable market prices and market inputs. Due to the unique characteristics of the loans and advances
portfolio and the fact that there have been no recent transactions involving the disposals of such loans and advances, there is no
basis to determine a price that could be negotiated between market participants in an orderly transaction. The group is not currently
in the position of a forced sale of such underlying loans and advances and it would therefore be inappropriate to value the loans and
advances on a forced-sale basis.

For specifically impaired loans and advances the carrying value as determined after consideration of the group’s IAS 39 credit
impairments is considered the best estimate of fair value.

The group has developed a methodology and model to determine the fair value of the gross exposures for the performing loans and
advances measured at amortised cost. This model incorporates the use of average interest rates and projected monthly cashflows
per product type. Future cashflows are discounted using interest rates at which similar loans would be granted to borrowers with
similar credit ratings and maturities. Methodologies and models are updated on a continuous basis for changes in assumptions,
forecasts and modelling techniques. Future forecasts of the group’s probability of default (PDs) and loss given defaults (LGDs) for
periods 2017 to 2019 (2015: for periods 2016 to 2018) are based on the latest available internal data and is applied to the first three
years’ projected cashflows. Thereafter, PDs and LGDs are gradually reverted to their long-run averages and are applied to the
remaining projected cashflows. Inputs into the model include various assumptions utilised in the pricing of loans and advances. The
determination of such inputs is highly subjective and therefore any change to one or more of the assumptions may result in a
significant change in the determination of the fair value of loans and advances.

GOVERNMENT AND OTHER SECURITIES
The fair value of government and other securities is determined based on available market prices (level 1) or discounted cashflow
analysis (level 2), where an instrument is not quoted or the market is considered to be inactive.

OTHER SHORT-TERM SECURITIES
The fair value of other short-term securities is determined using a discounted cashflow analysis (level 2).

LONG-TERM DEBT INSTRUMENTS
The fair value of long-term debt instruments is determined based on available market prices (level 1) or discounted cashflow analysis
(level 2) where an instrument is not quoted or the market is considered to be inactive.

AMOUNTS OWED TO DEPOSITORS
The amounts owed to depositors principally comprise of variable-rate liabilities. The carrying value of the amounts owed to
depositors approximates fair value because the instruments reprice to current market rates at frequent intervals. In addition, a
significant portion of the balance is callable or is short term in nature.

CASH AND CASH EQUIVALENTS, OTHER ASSETS, MANDATORY DEPOSITS WITH CENTRAL BANKS, AND
PROVISIONS AND OTHER LIABILITIES
The carrying values of cash and cash equivalents, other assets, mandatory deposits with central banks and provisions and other
liabilities are considered a reasonable approximation of their respective fair values, as they are either short term in nature or are
repriced to current market rates at frequent intervals.

Liquidity coverage ratio
Total Total
unweighted weighted
value(1) value(2)
Rm (average) (average)

High-quality liquid assets (HQLA)
Total high-quality liquid assets 137 348
Cash outflows
Retail deposits and deposits from small-business clients, of which 182 935 18 148
Stable deposits 2 900 145
Less: stable deposits 180 035 18 003
Unsecured wholesale funding 247 302 121 278
Operational deposits (all counterparties) and deposits in institutional networks of cooperative banks 131 570 37 826
Non-operational deposits (all counterparties) 115 732 83 452
Unsecured debt – –
Secured wholesale funding 21 396 42
Additional requirements 87 949 14 208
Outflows related to derivative exposures and other collateral requirements 1 240 1 240
Outflows related to loss of funding on debt products 699 699
Credit and liquidity facilities 86 010 12 269
Other contractual funding obligations – –
Other contingent funding obligations 196 827 8 789
Total cash outflows 736 409 162 465
Cash inflows
Secured lending (eg reverse repurchase agreements) 14 370 716
Inflows from fully performing exposures 48 114 31 000
Other cash inflows 9 944 9 936
Total cash inflows 72 428 41 652

Total
adjusted
value(3)

Total HQLA 137 348
Total net cash outflows (3) 125 692
Liquidity coverage ratio (%) 109,3%

(1) Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for inflows and outflows).
(2) Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates (for inflows and outflows).
(3) Note that total cash outflows less total cash inflows may not be equal to total net cash outflows to the extent that regulatory caps have been applied to cash
inflows as specified by the regulations.

The figures above reflect the simple average of the month-end values at 31 October 2016, 30 November 2016 and 31 December 2016
based on regulatory submissions to the South African Reserve Bank. This section on the liquidity coverage ratio has not been audited
by the group’s auditors.

Registered office
Nedbank Group Ltd, Nedbank 135 Rivonia Campus,
135 Rivonia Road, Sandown, Sandton, 2196.
PO Box 1144, Johannesburg, 2000.

Transfer secretaries in SA
Computershare Investor Services (Pty) Ltd, 15 Biermann
Avenue, Rosebank, Johannesburg, 2196, SA.
PO Box 61051, Marshalltown, 2107, SA.

Transfer secretaries in Namibia
Transfer Secretaries (Pty) Ltd, Robert Mugabe Avenue No 4,
Windhoek, Namibia.
PO Box 2401, Windhoek, Namibia.

Directors
V Naidoo (Chairman), MWT Brown* (Chief Executive),
DKT Adomakoh (Ghanaian), TA Boardman, BA Dames, ID Gladman (British),
JB Hemphill, EM Kruger, RAG Leith, PM Makwana,
Dr MA Matooane, NP Mnxasana, RK Morathi* (Chief Financial Officer),
JK Netshitenzhe, MC Nkuhlu* (Chief Operating Officer),
S Subramoney, MI Wyman** (British).
* Executive ** Lead independent director

Company Secretary: TSB Jali
Reg no: 1966/010630/06
JSE share code: NED
NSX share code: NBK
ISIN: ZAE000004875
Sponsors in SA: Merrill Lynch SA (Pty) Ltd
Nedbank CIB
Old Mutual Investment
Sponsor in Namibia: Services (Namibia) (Pty) Ltd

This announcement is available on the group’s website at
nedbankgroup.co.za, together with the following additional
information:

– Detailed financial information in PDF.
– Financial results presentation to analysts.
– Link to a webcast of the presentation to analysts.

For further information kindly contact Nedbank Group
Investor Relations at nedbankgroupir@nedbank.co.za.

Date: 28/02/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.

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