BUSINESS NEWS - The disclosure by Nedbank of metrics in its retail banking division is, quite simply, industry leading. I was struck by this – again – while reading its interim results presentation and booklet on Tuesday 7 August.
One might argue that it has to share this amount of detail, given the multi-year “evolution” underway in the unit. The latest is part of its “target operating model” programme. By 2020, it aims to lower its efficiency ratio (cost-to-income) for retail and business banking (RBB) at equal to or below 58%, from 64% currently.
Because of its relative size (and large fixed cost base), Nedbank has historically struggled with a stubbornly high efficiency ratio. Contrast this with Absa Group’s local RBB operations at 58.3 (from 56.6 a year ago), and one can see the disparity.
Nedbank needs to get the retail and business banking unit’s efficiency ratio to under 60 in order to achieve a groupwide target of ≤53% by 2020. It continues to achieve cost savings, and banked R237 million worth in the unit during the first half of 2018 (R177 million related to its target operating model efforts). Space reduction in the branch network continues apace – it discloses the cumulative square meterage saved – and it has reduced headcount by over 1 000 staff in the past 18 months, mostly through attrition. It even provides a breakdown of ‘new image’ versus ‘traditional’ branches as it continues the network modernisation.
But it’s in the client data where Nedbank really stands out from the rest. Apart from disclosing total retail clients, transactional ones and main-banked customers (which it always has), the bank has introduced additional metrics: active clients and consistently main-banked clients.
The former is any client who has been active in the past six months, while the latter is a main-banked customer for each of the past 12 months. Additionally, it has provided further details on what constitutes a main-banked customer. In other words, this would be how many transactions customers in different segments need to perform over a three-month period. This is an unprecedented level of disclosure.