Trading Update

RNS Number:1810L
Nedcor
16 May 2003


NEDCOR LIMITED ("NEDCOR")



TRADING UPDATE

In keeping with the practice commenced on 21 November 2002, Nedcor gives the
following update before the commencement of the closed period in respect of its
interim results for the first half of 2003. This is in line with the practice
followed by Nedcor's holding company, Old Mutual plc. The trading update covers
the first four months of 2003 ("the period").



ECONOMIC CONDITIONS

The early months of 2003 have presented a challenging and volatile operating
climate. The rand continued to strengthen beyond expectations to R7.25/US$1 at
30 April 2003 and interest rates remained high, constraining the overall demand
for credit. Weak equity markets, both globally and domestically, have also
presented a challenging operating backdrop for investment banking and wealth
management activities.



NEDCOR'S PERFORMANCE

These economic conditions have negatively affected Nedcor's performance during
the period and, if they persist, will similarly affect future performance. The
performance of the core banking business has been resilient in Nedbank
Corporate, which includes the Commercial and Treasury Divisions, and good in
Nedbank Retail and Peoples Bank. Investment Banking and Wealth Management have
been well below target. The rand value of international earnings has diminished
by over 20% due to the stronger average value of the rand against the US$ and
GBP over the first four months of this year compared to the same period last
year.


Over the period, organic growth in advances has been in line with domestic
lending growth and interest margins have been maintained. Net interest income
has thus grown. Non-interest revenue is well below expectations as adverse
market conditions have constrained opportunities for the realisation of private
equity and investment banking assets, and for generating advisory fees and
trading profits. Significant items of non-interest revenue disclosed separately
by Nedcor Investment Bank ("NIB") at the interim stage last year have also not
been repeated in the period. Credit quality, including unsecured microloans, has
been satisfactory despite the high interest rate environment, and the charge
against income for provisions is stable.



Expense growth is progressively reducing as the group's integration proceeds,
despite increased depreciation on recently commissioned technology projects, but
the cost-to-income ratio at this stage has increased as a result of lower
revenue growth. An additional expense reduction drive has thus been initiated.
Taxation has increased significantly as the benefit of assessed losses last year
is no longer available and because the tax net has widened to include more
foreign income.




The new preference share capital of R2bn raised in December 2002 has generated
additional earnings, the benefits of which are offset by the deduction from
income attributable to ordinary shareholders of the preference dividends
payable. The preference share capital supplemented primary capital, and capital
adequacy at 31 March 2003 exceeds regulatory requirements.



CORE EARNINGS PER SHARE

The net result is that Nedcor remains solidly profitable with improvements
through synergies planned into the future. However, core earnings (after
preference dividends) for the period are lower than for the comparative period
in 2002. Core earnings per share are further diluted by 11% due to the weighted
average effect of the shares issued in the second half of 2002 to acquire BoE
and the minority shareholding in NIB. This dilution reduces progressively to 6%
by the year-end.



These first four months do not necessarily set a trend for the full year, as
investment banking income and the effects of exchange rate and equity market
movements are unpredictable, but do represent four out of the six months that
will make up the interim results to 30 June 2003.



HEADLINE EARNINGS

The volatility in the value of the rand, in addition to affecting the rand value
of international earnings, also impacts headline earnings by the effects of
translating the balance sheets of integrated foreign operations into rand.
Translation losses of approximately R300m for the year to date, due to the
strengthening of the rand from R8.60/US$1 at 31 December 2002 to R7.80/US$1 at
15 May 2003, would be deducted from core earnings to determine headline
earnings.



AC133

The complex new accounting statement AC133, which deals with the valuation and
recognition of financial instruments and a new credit provisioning policy, is
presently being implemented in South Africa. Changes caused by the new standard
will be reported to shareholders for the first time as part of the interim
results and are excluded from the results on which comments are made in this
update. Capital adequacy at 30 June 2003 is expected to remain sound after
making the opening transitional adjustment required by AC133 and meeting
regulatory credit provisioning requirements.



INTEGRATION

The group's merger and integration with BoE is on track and on target with the
previously published timetable and synergy targets. The target for 2003 is to
achieve net merger benefits of R110 million before tax, growing to R905 million
by 2006.







Enquiries
Ewald Muller                               Tel.:   [phone]
Investor Relations & Strategy              Mobile: [phone]
                                           




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