Annual Report 2009 Bidvest Bank Limited Annual Report 2009 1 Contents Products and services 4 Bidvest Bank / Rennies Foreign Exchange branch list 6 Managing Director’s report 8 Financial highlights 14 Sustainability report 20 Directors’ responsibility for the financial statements 30 Report of the Audit Committee to the members of Bidvest Bank Holdings Limited 31 Independent auditors’ report 32 Directors’ report 34 Income statement 38 Cash flow statement 39 Balance sheet 40 Statement of changes in equity 41 Notes to the financial statements 44 Contact details 90 Bidvest Bank Limited Annual Report 2009 3 Products and services Corporate Foreign Exchange Travel Foreign Exchange fxpaynet™ Online Foreign Exchange Solution Foreign Bank Notes (80 Currencies) Liquidity Management Bidvest Bank World Currency Cards™ Payments and Receipts for Foreign Currency American Express™ Travellers Cheques Spot and Forward Exchange Contracts (FEC’s) Bidvest Bank Cash Passport Card Open Accounts Foreign Currency Accounts Foreign Money Transfers Deposits and Investments Bank Drafts BidSave™ Savings and Transactional Account MoneyGram™ Call Accounts Telegraphic Transfers Fixed Deposit Accounts Notice Deposit Accounts Foreign Currency Accounts Trade Services Loans Customer Foreign Currency (CFC) Accounts Asset-based Finance Foreign Bills for collection Rental Finance Guarantees Secured Loans Letters of Credit General Banking Facilities Trade Finance Loans Trade Finance Commercial Mortgages Card Solutions Exchange Control Corporate Payment Card Exchange Control Services World Currency Card™ BidSave™ Savings and Transactional Cards Rand Travel Card™ Products and services Bidvest Bank Limited Annual Report 2009 5 Bidvest Bank / Rennies Foreign Exchange branch list Gauteng Region - 35 Western Cape - 19 – Alberton - Meyersdal Mall – Bellville - Tyger Valley Shopping Centre – Balfour - Balfour Park Shopping Centre – Cape Town CBD - St Georges Mall, Cathedral 101 A – Bedfordview - Eastgate Shopping Centre (lower level) – Cape Town CBD - St Georges Mall, Shop 2 – Bedfordview - Eastgate Shopping Centre (upper level) – Cape Town International Airport - Domestic Arrivals – Benoni - Northmead Square – Century City - Canal Walk (upper level) – Brakpan - Mall at Carnival – Claremont - Cavendish Centre (lower level) – Centurion - Centurion Shopping Centre – Claremont - Cavendish Centre (upper level) Musina – Cresta - Cresta Shopping Centre – Constantia - Constantia Village Shopping Centre – Fourways - Fourways Mall – Fish Hoek - The Arcade, Main Road – Johannesburg CBD - Newtown – George - Branch located inside Walton’s Stationers, – Johannesburg CBD - Park Station Commercial Close – Johannesburg CBD - Rissik Street – Kenilworth - Kenilworth Centre Polokwane – Kempton Park - Festival Mall – Seapoint - Adelphi Centre – Kensington - Park Meadows – Somerset West - Somerset Mall (entrance 2) – Killarney - Killarney Mall – Somerset West - Somerset Mall (entrance 4) – Midrand - San Ridge Square – Stellenbosch - Checkers Centre – Midrand - The Boulders – Tableview - Bayside Centre – Modderfontein - Greenstone Shopping Centre – V & A Waterfront - Clock Tower Nelspruit – Norwood - Norwood Shopping Centre – V & A Waterfront (Victoria Wharf) Pretoria – Oakdene - The Glen Shopping Centre – Wynburg – Maynard Mall Rustenburg – OR Tambo International Airport - OR Tambo Central Johannesburg Witbank Terminal Building Eastern Cape - 4 Vanderbijlpark – Pretoria - Brooklyn - Cherry Lane Shopping Centre – Pretoria - Brooklyn - Brooklyn Mall – East London - Vincent Park Shopping Centre – Pretoria - Hatfield Square – Mthatha - Savoy Shopping Centre – Pretoria - Kolonnade Centre – Port Elizabeth - The Bridge Shopping Centre – Pretoria - Menlyn Park Shopping Centre (upper level) – Walmer Park Shopping Centre – Pretoria - Sanlam Centre, Andries Street – Pretoria - Sunny Park Centre Freestate - 1 – Randburg - Sanlam Centre Richards Bay – Roodeport - Westgate Shopping Centre – Bloemfontein - Loch Logan Waterfront Ballito – Rosebank - The Firs Pietermaritzburg Bloemfontein Gateway – Sandton City - Fountain Court Limpopo - 2 Pinetown La Lucia – Sandton City - Nelson Mandela Square Durban – Vanderbijlpark - Riverside Boulevard Amanzimtoti – Vanderbijlpark - Vaal Mall – Musina - N1 Business Centre Shelly Beach – Polokwane - Limpopo Mall Mpumalanga - 3 Kwazulu-Natal - 14 Mthatha – Nelspruit - Riverside Mall – Amanzimtoti - Arbour Crossing – Nelspruit - The Pinnacle Building – Ballito - Ballito Lifestyle Centre – Witbank - Highveld Mall – Berea - Musgrave Centre East London – Durban - Mutual Mall North West - 1 – Hillcrest - Hillcrest Corner – Tableview La Lucia - La Lucia Mall George – Rustenburg - Waterfall Mall – Montclair - Montclair Mall Cape Town Stellenbosch Port Elizabeth – Morningside - Windermere Centre Fish Hoek Somerset West – Pietermaritzburg - Midlands Mall Branches open after July 1 2009 – Pinetown - Pine Crest Centre – Richards Bay - Boardwalk – Cape Town International Airport - Ground Plaza – Shelly Beach - FM Howe Building – Cape Town International Airport - International Departures – Umhlanga - Gateway Centre – Durban - La Mercy Airport – Westville - Pavillion – East London - Hemingways Mall Bidvest Bank / Rennies Foreign Exchange branch list Bidvest Bank Limited Annual Report 2009 7 Managing Director’s report Operating environment Bidvest Bank’s operating environment became more The January to June 2009 period showed a very different • 78% growth in deposits to R832 million. challenging as the 2009 financial year progressed. This scenario when compared to the previous six months: Pleasing increase in the number of corporate and individual depositors financial period consisted of two six month periods which - economic conditions became more challenging each had materially different micro and macro economic • Improved return on equity to 21,9% and return on assets to 8,4% conditions and characteristics. Bidvest Bank operated - the South African economy moved into recession, with • Low financial leverage of 2,6 times well in this difficult, volatile and continuously changing strong declines in mining, manufacturing and retail economic world. The Bank produced excellent results for • Strong positive cash flows the six month July to December period, but generated - the Business Confidence Index reached a 10 year low much slower profit growth in the January to June period. • Further development of infrastructure and divisionalisation of the Bank’s - rising unemployment activities The July to December trading period reflected: - decline in disposable income, and higher personal debt • Number of employees increased by 149 to 699. - a stable growing South African economy ratio Low staff turnover of 6% (2008: 7%) - high interest rates. The prime interest rate was raised by - lower interest rates and a declining inflation rate 50 basis points on ten occasions between June 2006 and • Credit loss ratio reduced to 0,4% June 2008, peaking at 15,5%, before the first 50 basis - Rand appreciation, with Rand strength peaking at year end • Successful launch of new, competitive products point rate cut in December 2008. - significant drop in asset values and increases in asset • Effective training programmes implemented and big increase in training - a volatile and depreciating Rand with the Rand showing impairments and bad debts in the South African spend significant weakness in October 2008 banking industry • Strong growth and development of the Bidvest Bank / Rennies Foreign - relatively high inflation Exchange brands. - the start of the decline in asset and commodity prices Operational review Encouraging growth in the corporate and individual customer base emanating from new product initiatives and effective, successful - worldwide, the systemic credit and liquidity crisis started • 57% increase in profit before taxation to R183 million advertising to affect the confidence in the global banking industry Profit before taxation for the six months to December 2008 increased by 128% to R108 million • Healthy growth in profit per employee - the beginning of the deteriorating economic outlook and confidence in South Africa and abroad (2007: R47 million). • 16 new branches opened and 2 closed during the year. Total number of Profit growth for the second six months slowed to 7% branches: 83 - the South African economy showed first signs of negative to R75 million (2007: R70 million) growth in the fourth quarter of 2008 • Significant improvements made in compliance, governance, internal • 38% increase in net operating income to R461 million audit and security - reduced consumer disposable income and declining Strong growth in fee, commission and trading income retail sales • Recognition Awards: • 31% increase in net interest income to R59 million MoneyGram - 2008 African Agent of the Year Airports Company South Africa - 2008 International Retailer of the Year • Improvement of cost to income ratio to 58,9% from 61,3% Effective expense management in a growing bank • 31% growth in total assets to R1,6 billion. Strong balance sheet a platform for future growth Managing Director’s report Bidvest Bank Limited Annual Report 2009 9 Managing Director’s report (continued) Strategy The Bank is small and still in its development phase and its true potential will only be realised in the years ahead. Bidvest Bank’s strategy is driven by the following core In the current environment, profitability is influenced values: primarily by the high fixed component of our costs, when measured against the low revenue growth,