Results for the year

ended 31 December 1999

OUTLINEOUTLINE

Stuart Morris

Financial highlights

Provisions

Richard Laubscher

Metric dashboard

Divisions

Positioning

FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS

Dec-99 Dec-98 ChangeMargin 3.64% 3.70%NIR to total income 44.4% 45.0%Efficiency ratio 51.7% 56.2%Attributable income 2 406 1 900 27%EPS 1 024 822 25%Shareholders' funds 10 066 9 131 10%ROE 25.3% 23.3%Capital ratio 12.0% 10.8%Deposits 118 225 106 900 11%Advances 103 783 96 483 8%Total assets 129 844 117 527 10%ROA 1.95% 1.74%

INCOME STATEMENTINCOME STATEMENT3 yr Rm Dec-99 Dec-98 Growth PF

12% Net interest income 4 359 3 925 11% 12%19% Non-interest revenue 3 486 3 211 9% 14%15% Total Income 7 845 7 136 10% 13%36% Provisions (869) (698) 24% 26%13% Net Income 6 976 6 438 8% 11%

9% Expenses (4 054) (4 008) 1% 4%21% Net Operating Income 2 922 2 430 20% 23%

Capital profits 717CBD properties write-down (225)General provision (492)Net income before taxation 2 922 2 430 20% 23%

7% Taxation (625) (589) 6% 10%26% Net income after taxation 2 297 1 841 25% 27%

Earnings of associates 130 59 120% 80%Income attributable to minorities (21)

28% Attributable income 2 406 1 900 27% 27%

EARNINGS PER SHARE - UP 25%EARNINGS PER SHARE - UP 25%EARNINGS PER SHARE - UP 25%EARNINGS PER SHARE - UP 25%

528

665

822

1024

217

224

231235

0100200300400500600700800900

10001100

96 97 98 99

190195200205210

215220225230235

EPS {lhs} WA No of Shares {rhs}

CAGR 3 Year 25%

PEER GROUPPEER GROUP

25.3%

12.0%

23.3%

10.8%

20.1%

10.5%

19.0%

10.6%

15.5%

10.5%

ROE Capital ratio

Nedcor 99 Nedcor 98 Firstrand Standard ABSA

PEER GROUPPEER GROUP

51.7%

56.2%

61.1% 61.4%

67.2%

Efficiency ratio

Nedcor 99

Nedcor 98

Firstrand

Standard

ABSA

OPERATING COMPANIESOPERATING COMPANIESOPERATING COMPANIESOPERATING COMPANIES

Rm Dec-99 Dec-98 Change % of Group

Nedcor Bank & group ops 1 862 1 447 29% 77%Nedcor Investment Bank * 479 400 20% 20%Cape of Good Hope 65 53 23% 3%TOTAL 2 406 1 900 27% 100%

* NIB reported earnings growth of 25% to R500 million, of which R21 million was attributable to NIB minorities

NET INTEREST MARGINNET INTEREST MARGIN

Dec-99 Dec-98 Change (bp)Pure margin 3.19% 3.20% (1)Interest reserve -0.19% -0.15% (4)Shareholders' funds 1.08% 1.06% 2Fixed assets -0.21% -0.22% 1Investments -0.23% -0.19% (4)Reported margin 3.64% 3.70% (6)

SHAREHOLDERS’SHAREHOLDERS’ FUNDS UP 10%FUNDS UP 10%

31-Dec-98 9 131Net income 2 406Dividends (552)Share capital & premium raised 265Goodwill written off (1 325)Didata International (542)

Edward Nathan & Friedland (400)

Other (383)

NIB minorities & other 14131-Dec-99 10 066

PROVISIONSRm avg advs Rm avg advs

INCOME STATEMENT

Provison charge 869 0.85% 698 0.77% - incl. interest reserve 1 099 1.07% 857 0.94%

BALANCE SHEET

Specific provisions 1 808 1.8% 1 449 1.6%General provisions 1 028 1.0% 419 0.5%

2 836 2.8% 1 868 2.0%Credit insurance 193 0.2% 0.0%TOTAL 3 028 3.0% 1 868 2.0%

Dec-99 Dec-98

Provisions were bolstered, not fed into earnings

NON-PERFORMING LOANSNON-PERFORMING LOANS

Rm of advs Rm of advs

Non-performing loans 3 513 3.3% 2 640 2.7%Expected recoveries (1 703) -1.6% (1 249) -1.3%Expected losses 1 810 1.7% 1 391 1.4%

Adequacy of provisions

Gross coverageNet coverage

Dec-99 Dec 98

86%

Dec-99 Dec-98

71%167% 134%

Metric dashboard

Beacons or markers

Multiple of revenue / earningsMultiple of revenue / earnings

• Marker = ROE– gearing level - financial leverage, financial risk

– benchmarks in low inflation economies

– proportion of NAV in hard currencies

– ROE required to self-service capital

– separate management of shareholders’ funds

– capital allocated to best ROE opportunities

RESULTS OF ROE FOCUSRESULTS OF ROE FOCUS

• Capital ratio grown to 12%– Gearing of 8.5 times is low

– Surplus capital held centrally and allocated to best ROE opportunities

• Exit inadequate ROE businesses– Travel, air-ticket processing, linked products

– Duplicate areas & international businesses

• Positioned to gear capital mix at low rates• Much less need for earnings retention

ROE PROSPECTSROE PROSPECTS

• >R6bn invested in hard currencies– plans to create currency for further acquisitions, for

example listing DDIL

• Capital held in cash during high rates– recent moves with Didata - R3bn invested

– market value surplus of >R3bn not booked

– high earnings growth, hard currency assets

– cellular & internet deals in pipeline

• Shareholders’ funds are working hard

ASSET PRODUCTIVITYASSET PRODUCTIVITY

• Marker = ROA– nearing 2%

– high return relative to low risk

– provisions nearly 3% of advances• Gross coverage 86%, net coverage 167%

• Ahead of indicated standardised provision regulations

– strong provisions enable improvements to flow through to bottom line

RETAIL DIVISIONRETAIL DIVISION

• Capital One JV for underserved through Peoples Bank– pilots show high upside– information based strategy - data analysis– empowerment deal under negotiation

• Right client, brand affinity & attitudinal pull– Nedbank & Permanent Bank– positioned to follow suburban drift

• Nedbank Private Bank– merged Nedbank, Syfrets & UAL, leading player

• New card system– big growth in electronic base

COMMERCIALCOMMERCIAL

• ROE per client capability– focused service (six-pack teams) on valued clients

– factored into all credit decisions

– manage client channel choices• 65% of commercial clients have electronic facilities

• 75 000 business clients use telecentre

• specialised service centres (outside branches)

• High ROE/low cost ratio division• Formative relationships, piggy-back growth

CORPORATECORPORATE

• Core credit analysis capability– clean sheet, small share of main failures

• Quality growth– running at 24%, 18-20% prospective

• Term lending = 40% (annuity component)• Rate competition has always been keen• Client profitability MIS capability• New electronic platform • NIB/ENF deal flow

INTERNATIONALINTERNATIONAL

• Do not do– High-street banking

– Investment banking

– Global treasury

– Take risk in unknown countries

• Do– go virtual

– minimise capital intensity

– share skills and risk with partners

– use armour-piercing strategies for barriers to entry

RESULTSRESULTS

• Only major bank gaining market share• Commercial market gains, doubled in 5yrs• High ROA, high asset quality, low risk

– high provisions/low NPLs

– economic upturn goes directly to bottom line

• CBD properties written down

NON-INTEREST REVENUENON-INTEREST REVENUE

• Marker = NIR/Total income– target 45%

– low capital intensity

– choice of channel, ability to analyse activity

– high inflation protection

– high intellectual capital

• Results– cost consequences of channel choice

– insurance sales platform, at least R150m upside

– private equity growing

EXPENSESEXPENSES

• Efficiency ratio (cost/income)– sustainable efficiency without compromising service

via process re-engineering culture

• Other beacons/markers– assets per employee up by 20% in 1999 to R7.5m

– profits per employee up by 37% in 1999 to R139 000

– fixed assets/income now inside 3 months

– transaction volumes, cycle times, error rates, unit costs

Efficiency curveEfficiency curveEfficiency curveEfficiency curve

PROCESSENGINEERING

IT BASED PROCESS

RE-ENGINEERING

VOLUME& SCALE

INTERNATIONALISE

Un

it C

ost

25%

50%

20%

ADD VOLUME 3rd Party/Stanbic Underbanked

PROJECT SYNERGYPROJECT ALPHA

REPLICATEINTERNATIONALLY

75%

EXPENSE FOCUS RESULTSEXPENSE FOCUS RESULTS• Cost ratio now under 52%

– lowest in SA

– international benchmarks within sight

– continuing momentum, eg R400m via projects

– ratio in Retail >60% under attack

• Branch closures & repositioning• Staff productivity way ahead of peers• Share options in lieu of bonuses• 3rd year of zero increase in processing costs• State of the art technology platform

– substantial volume headroom

PLATFORMSPLATFORMS

• Major spend on– new internet engine

– direct telecentre

– cell phone (view phone)

– electronic banking

– network “pipe”

• Client choice, pricing for functionality

PLATFORM RESULTSPLATFORM RESULTS

• 903 4th generation ATMs, top in Saswitch• 337 SSTs, user friendly touch screen• 90 000 business clients contracted at Nedtel

– first with WAP/MMM internet connectivity

• 45 000 internet clients– 770 000 transactions per month

• Lower costs/higher functionality

BUSINESS MODELBUSINESS MODEL

• Smaller units– co-operation, participation, ownership– performance driven, individual and team– invest in performers/exit non-performers

• Values based culture– fairness, development, integrity, performance– people management rewarded

• Concentration on– virtual form & ensuring convergence play– intellectual capacity– partnerships (share knowledge & risk)

• Didata , Capital One , Dresdner & BNP , HSBC , Old Mutual , State Street, American Express

CONCLUSIONCONCLUSION

• Less risk• More capital appreciation• Higher returns• Inch by inch sustainable performance

improvements• Pick-ups in GDP, volume & efficiency go

straight to the bottom line