/ 1 August 2005

Nedbank talks, who is listening?

Recently, Nedbank took time off to ask black customers to accompany it on a rather interesting journey.

The bank launched its client empowerment share scheme, Eyethu (Zulu for ”ours”). Starting in August, the scheme will see the bank sell 2,17%, or 9,5-million shares, of its issued share capital to black -clients. To gain full benefit, the -clients will have to maintain Nedbank as a -primary bank for three years. The clients will qualify for capital guarantee on their invested amount and a bonus share for every three shares purchased.

The scheme basically asks black clients to buy into Nedbank’s recovery story, under way since Tom Boardman took charge in November 2003. But is Nedbank a share to buy?

Its price has risen considerably over the past year, in line with the general rise in bank shares, driven by a consumer boom and takeover talk at Absa and FNB.

But Nedbank struggles to gain market share in a range of key areas such as home loans and credit cards. Clients who buy the shares will have to consider that Nedbank is currently offering returns on equity of 7,3%, when the other three banks are at more than 20%. Nedbank hopes to achieve that by 2007, meaning those who buy now will have only a year’s benefit of good returns. By then Absa — or is it Barclays? — expects to be offering a 30% return on equity.

Investec securities currently has a ”sell” recommendation on Nedbank and a ”buy” recommendation on Standard, Absa and FNB.

But Nedbank is also asking the black middle-class to embrace it as it broadens its appeal.

Watching Nedbank change from its elitist image to the bank for all South Africans has been nothing less than a lesson in grace and humility. Now it claims to be listening

The process will involve the rebranding of lower-income oriented People’s Bank into Nedbank. One wonders how that will work.

Remember the clients they attracted with their elitist ”Who are those people?” ad campaign? Now imagine some millionaire being shoved in the bank queue by a construction worker waiting to access funds in his Mzansi account. Pity the ultra rich.