Nedbank has learnt hard lessons on way to becoming major bank
• Group is now well capitalised and has a clear vision for the future, with good technology
The JSE is looking more and more like an events venue. The ceremonial blowing of the kudu horn used to be reserved for listings, but now almost anyone can take the premarket breakfast slot and blow their own trumpet.
This week, Nedbank’s 50 years on the JSE is one of the more credible causes for celebration. But even this is stretching the truth somewhat as it was wealth manager Syfrets that listed in August 1969. Nedbank only came on to the exchange after it took over Syfrets in 1973.
Nedbank was an anomaly in an industry dominated on the one side by the UK-controlled imperial banks Standard Bank and Barclays (now Absa), and on the other by often Afrikaans dominated building societies such as United. Then there were the banks set up as a deliberate counterpoint to the British banks, such as Volkskas, and in the 1960s the highly innovative Afrikaans start-up TrustBank.
Nedbank, or to give its original name, Nederlandsche Banken Crediet veree ni gingvo or Zuid-Afrika, was started in 1888. It made its ambitions known by opening a branch in Church Street, Pretoria, where the Treasury now sits. It even had an office in London.
Few people these days are aware of the business’s Dutch roots. Perhaps they assume Ned is the name of a previous CEO, in the same way that the original Barclays Bob ATM machines were named after its then CEO, Bob Aldworth. In 1951 Nedbank went through a managed separation from its Dutch parent and lost its last large Dutch shareholder when Bank Mees & Hope sold its 20% holding in 1969.
At the JSE celebration, chair Vassi Naidoo pointed to a number of Nedbank firsts, which included computerised banking products, paying interest on current accounts and introducing
debit cards into the market.
Without a strong parent for much of its time, Nedbank has indulged in a wheeler-dealer approach to banking. It had to be bailed out by Old Mutual not once but twice, the first time after losing its shirt on Louis Luyt’s Triomf fertilizer business in 1985, which led to Old Mutual taking majority control. The second in 2003 was after CEO Richard Laubscher borrowed R20bn to buy ailing Board of Executors (BoE), when the bank was heavily criticised for its misleading financial disclosure.
Naidoo refers to this as the period “of the rights issue”. Old Mutual had insisted to the market that it would never have to bail out Nedbank, but it did, of course, and put plenty of capital into the bank. It didn’t even trust any of the Nedbank crowd to be the financial director and instead appointed one of its own, Bob Head. Nedbank later made history with the appointment of SA’s first black banking financial director, Raisibe Morathi.
After the BoE purchase Nedbank briefly became the largest bank in SA. That would have been one of the motivations. Shareholder value, what’s that? But the biggest bonus of the BoE purchase has been the new management blood. As the Laubscher crowd had been largely discredited the senior jobs went to former BoE people
— Tom Boardman became CEO, Mike Brown financial director (and in 2010 CEO himself) and Brian Kennedy head of the investment bank.
Laubscher had ambitions to run a much larger bank after he made a hostile bid for Standard Bank in 1999. It is fair to consider Nedbank (or Nedcor as the listed entity was called) as the most dynamic bank of the day — the equivalent of FirstRand today, you might say.
FNB had been taken over by Rand Merchant Bank a few months before and was still in transition from a highly conservative outfit; Absa, though doing OK, was hardly a fatted cow. But Standard Bank combined a strong brand with a dozy management team, especially in retail. It was only when the outstanding Jacko Maree was brought in as CEO to replace Mike Vosloo that Standard Bank began its counterattack.
Naidoo says even though the exercise was a failure it showed the chutzpah of the bank at the time. The takeover was never put to the vote as then finance minister Trevor Manuel, stopped it. It would significantly reduce competition to have just three major banks, not four (some academic writers on competition might disagree). The potential political fallout from the branch closures and retrenchments was the major concern.
Manuel might wish he had let it through now that he is chair of Old Mutual, as it would have been the dominant shareholder in a mammoth bank.
Today’s Nedbank has learnt the lessons of the Laubscher years. It was a hard road for his immediate successor, Boardman, but by the time Brown took over in 2010 it was exploiting the marketing opportunities of being the green bank very well. It is now well capitalised and has a clear vision for the future, with good technology.
The book I would like to write about Nedbank is the way in which it lost the opportunity to be largest player in asset management as well as in wealth management.
It had two of the largest nonlife office asset managers, Syfrets and UAL, 25 years ago. First it allowed the Syfrets team under Leon Campher and Tony Gibson to leave and form Coronation, then a few years later it tried to force Syfrets and UAL together, never mind the differences in culture and personality. When it acquired BoE Asset Management, instead of exploiting the brand it renamed it Quaystone. This has echoes of the Keystone Cops, a bumbling police force in a series of silent films. It sank into oblivion as neither Nedbank nor Old Mutual had any incentive to save it.
In fairness, under Dave Macready and his successor, Iolanda Ruggiero, a solid unit trust and private client business has been built without an institutional asset management arm. Its Best of Breed unit trust suite is in the top handful of management companies.
WITHOUT A STRONG PARENT FOR MUCH OF ITS TIME, NEDBANK HAS INDULGED IN A WHEELER-DEALER APPROACH
IT WOULD SIGNIFICANTLY REDUCE COMPETITION TO HAVE JUST THREE MAJOR BANKS, NOT FOUR