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Old Mutual has bigger plans for Nedbank

Hemphill appointment the clue.

JOHANNESBURG – The decision by the Old Mutual Group to appoint former Liberty Group chief executive Bruce Hemphill as CEO, signals how serious it is about maximising synergies between Old Mutual Emerging Markets (OMEM), Nedbank and Mutual & Federal.

The move deviates significantly from a string of high-profile internal appointments that the London-based financial services group has made in the past two years.

In 2013, Old Mutual replaced Peter Todd, CEO of its short-term insurance business Mutual & Federal (M&F), with Raimund Snyders, who was COO and head of distribution for Old Mutual’s Africa operations.

Around the same time it appointed Mark Weston, then UK country head of Nedbank Capital, to head M&F’s commercial and rest of Africa portfolio.

Last year, Ingrid Johnson, who achieved great success as head of retail and business banking at Nedbank, was appointed group finance director of Old Mutual.

And last month it was announced that Dave Macready, currently managing executive of Nedbank Wealth, would replace Marshall Rapiya to become CEO of Old Mutual South Africa on May 1.

Based on this track record, you would be forgiven for thinking that Paul Hanratty, who is of a similar age to Hemphill, would have been the obvious successor to Roberts. Hanratty has been with Old Mutual since 1984 and was appointed group operating officer in 2013.

Old Mutual wants what Liberty and Standard Bank have

 So why the surprise appointment of Bruce Hemphill, who is not only an outsider but was top of the ranks at one of Old Mutual’s competitors?

The suggestion seems to be that Old Mutual wants Hemphill to help it do what Liberty and Standard Bank have been better at doing: partnering. Specifically, partnering on bancassurance and product distribution in the rest of Africa.

Hemphill was chief executive of the Liberty Group from 2006 to 2014, when he was appointed chief executive of wealth, insurance and non-bank financial services at Liberty parent, Standard Bank.

Liberty and Standard Bank’s partnership on bancassurance and wealth contributed a not insignificant R2 billion to personal and business banking’s headline earnings of R9.8 billion for the 2014 financial year.

Nedbank Wealth, on the other hand, has struggled to find meaningful growth in its bancassurance business, which is mentioned only twice in its most recent results. (Bancassurance is mentioned 12 times in Standard Bank’s results.)

According to Old Mutual spokesman, William Baldwin-Charles, the Old Mutual board considered a number of internal and external candidates.

“In Bruce we found a candidate who has the unique combination of insurance, banking, asset management and wealth management; experience in the key regions of South Africa and rest of Africa; and a track record of growing a successful bancassurance partnership in South Africa and sub-Saharan Africa. The unique combination led us to select him over internal candidates,” Baldwin-Charles said in an emailed response to questions.

“I think they want to get more synergies with Nedbank and he [Hemphill] was running the wealth business in Standard Bank. He will drive the integration process,” commented Adrian Cloete, portfolio manager at PSG, who said Hemphill was an “excellent choice” to replace Roberts.

A Johannesburg-based analyst told Moneyweb that Hemphill’s appointment suggests the group will be kept more or less intact, following rumours of a split into a developed and an emerging markets business. “That now seems less likely, given that the person you’ve appointed predominantly has experience from South Africa,” he said.

“Whether or not they thought it imminent, for an organisation that size you must always have a succession plan for just in case. There should’ve been someone [in the group] being groomed,” said Ian Cruickshanks, chief economist at the SA Institute of Race Relations.

That Old Mutual wants OMEM, Nedbank and M&F to work more closely together was highlighted when it announced last year that it would be incentivising the executive teams to drive revenue, cost and capital synergies between the three businesses.

Hemphill may just be the missing link.

 

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Old Mutual will never learn – Nedbank clients despise Old Mutual because they sell rubbish products which only make sales people rich and improve the income stream for OMSA. This “synergy” has been tried some many times since the ’80’s will nil success, because OMSA does not focus on products that are beneficial to Nedbank clients, and their approach is one of forced sales and all their own products. There is no love lost between Nedbank and OMSA and in fact you will find that Nedbank consider them as nothing more than a hindrance

Quite simple really – buy the OM or Ned shares, never their products. Executives are incentivised iro the shares not the investment returns to clients or the value to the client of the banking product.

End of comments.

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