Board­man sets his goals

Ser­vice con­tract ex­tended to 2010

Finweek English Edition - - Companies & markets - BRUCE WHIT­FIELD

NED­BANK’S 2006 AN­NUAL RE­PORT out­lines CEO Tom Board­man’s exit strat­egy ahead of the 2010 Soc­cer World Cup in South Africa. By then he would have served the group as CEO for a lit­tle over six years.

Board­man’s five-year ser­vice con­tract be­gan on 10 De­cem­ber 2003 but has been ex­tended to 28 Fe­bru­ary 2010. “To al­low him the op­por­tu­nity to present the 2009 fi­nan­cial re­sults.”

By then, share­hold­ers will be able to ob­jec­tively judge the qual­ity of the Ned­bank turn­around em­barked upon by the Board­man-led man­age­ment team. By then, Board­man will be two months past his 60th birth­day – the manda­tory re­tire- ment age for Ned­bank ex­ec­u­tives.

Some an­a­lysts have pri­vately ex­pressed con­cern with re­gard to the source of Ned­bank’s fu­ture growth once it has com­pleted the “fix­ing phase” of the busi­ness.

With the turn­around al­most com­plete, the group has con­fi­dently re-em­pha­sised its com­mit­ment to achiev­ing the cru­cial tar­gets of a re­turn on eq­uity of 20% and an ef­fi­ciency ra­tio of 55% by year-end 2007.

How­ever, those tar­gets will be made more dif­fi­cult by the costs as­so­ci­ated with the ex­pan­sion of the group’s oncene­glected re­tail fran­chise as it in­vests in its small re­tail branch net­work and chain

of ATMs.

In­vestors will take heart from the fact that the group, which for much of the past three years has been haem­or­rhag­ing clients and los­ing mar­ket share across many of its di­vi­sions, is grad­u­ally mak­ing a come­back in some seg­ments.

Board­man writes: “Win­ning back mar­ket share on a prof­itable and sus­tain­able ba­sis is the true mark of the turn­around within Ned­bank.” There were some signs of a turn-around in its card di­vi­sion and Im­pe­rial bank to­wards year-end 2006, while Ned­bank Cor­po­rate, says Board­man, saw strong growth in whole­sale ad­vances ahead of its peer group.

Key to the suc­cess of the strat­egy will be whether or not the bank can meet its stated in­ten­tion of “un­leash­ing syn­er­gies” with its fel­low Old Mu­tual sub­sidiaries, OMSA and Mu­tual & Fed­eral.

Con­trol­ling share­holder Old Mu­tual plc has de­vel­oped a joint strat­egy for the three com­pa­nies that will see them seek both new rev­enue sources through greater co-op­er­a­tion as well as cost-sav­ing op­por­tu­ni­ties. To date, Ned­bank and OMSA have jointly out­sourced their data and voice net­works, giv­ing them greater buy­ing power, while their for­ays into ban­cas­sur­ance are start­ing to gen­er­ate new rev­enues.

Ned­bank’s turn­around process has been me­thod­i­cal and, by ne­ces­sity, a time-con­sum­ing process. Mean­while, its com­peti­tors have been reap­ing the ben­e­fits of a ro­bust macro-econ­omy, record busi­ness and con­sumer con­fi­dence.

But the an­nual re­port sug­gests that the bank is pre­par­ing to seek new busi­ness op­por­tu­ni­ties. Among the ini­tia­tives out­lined by new chair­man Reuel Khoza is a “con­trolled ex­pan­sion” into Africa. While south­ern Africa will re­main the core fo­cus of the group, it sees ex­pan­sion to other parts of the con­ti­nent as of­fer­ing growth po­ten­tial.

The group has lagged its peers due to its pro­longed in­ward fo­cus but now says its first pri­or­ity will be to grow its ex­ist­ing busi­nesses in Namibia (where it now has a sec­ondary list­ing), Le­sotho, Swazi­land, Zim­babwe and Malawi.

In ad­di­tion, says Khoza, the group is also on the hunt for for­eign full-ser­vice banks in sub-Sa­ha­ran coun­tries. Es­tab­lished play­ers in Africa – such as Absa and Stan­dard Bank – know that’s con­sid­er­ably eas­ier said than done.

Turn­around’s al­most com­plete. Tom Board­man

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.