Business context and trading conditions

At Bidvest Financial Services, we understand that sustainable business means returning to the basics and ensuring sound business policies and practices.

The core of our business has always been foreign exchange, in which we have a 150-year history, itself a demonstration of long-term sustainability. Acquiring our banking licence in 2000 signified entry into a highly regulated environment with associated costs and administrative commitments.

In 2005, we extended our offering into specialist fields by supplying foreign corporate exchange services through the internet, leading to rebranding as Bidvest Bank. This enhanced image enabled us to move into more traditional banking, growing our deposits and specialist lending business in a process that has gained momentum over the last three years. The growth and new product offerings of our insurance business has also been an area of focus.

Our core revenue generators remain in corporate foreign exchange. We have developed a sales force of almost 100 people to drive our penetration of this large market. We have developed a card division that offers a range of products linked to foreign exchange, including our world currency card. We recognise significant market opportunities in our core areas and rather than look to other types of banking, we drive this core potential in a way that broadens our revenue streams.

Thanks to appropriate training investment and adaptable teams, the challenge of bedding down the 2010 acquisition of the vehicle fleet and asset financial service business was successfully met while adhering to all regulatory requirements.

The economic downturn since 2008 has been accompanied by a trend towards increasingly stringent regulation of many sectors, banking in particular. Bidvest Bank is deeply committed to ensuring its compliance with all acts and regulations. We have built a team of over 70 governance and compliance specialists.

Following the international financial crisis that started in 2007, a Basel III framework has been developed that includes an enhanced Basel II and apparatus to limit system-wide financial distress. Bidvest Bank already complies with Basel III, demonstrating strong compliance commitments as the requirements only come into force in 2015 and 2018.

Employees receive regular training on all policies and procedures relevant to their roles and responsibilities. Line management is responsible for ensuring compliance by employees with laws, regulations, policies and procedures. Compliance is monitored by the compliance, internal audit and forensic investigations and security departments. All instances of non-compliance are reported and disciplinary action taken.

Strategic widening of the scope of our business was the major change, initially driven by the integration of the fleet services business. The process was reinforced by the Bidvest South Africa restructure which positioned us as an autonomous banking and insurance services business.

Capital expenditure increased to R768,0 million (2010: R689,6 million), reflecting the increased size of the business after the acquisition of the vehicle fleet and asset finance business. The number of retail banking branches rose from 88 to 90.

The bank made substantial investment in information technology in the form of technical skills, infrastructure and systems. Disaster recovery was enhanced and successfully tested.

Expansion of the product range continued. Bidvest Bank became the first South African financial institution to include Chinese yuan as a standard offering in its range of foreign banknotes. Our range of currency cards was continually expanded while a growing number of depositors opened seven-day call accounts.

We also launched a private client foreign exchange service, taking advantage of the quality profile of our core customer base.

The bank built on its lead as the South African pioneer of internet-based foreign payment and receipt technology by further collaboration with our global payments partner at Travelex. By year-end, we were preparing to launch a rebranded, updated web-based corporate settlement service – Bidvest Bank Global Payments Online^TM.

Performance

The division put in an exceptionally strong performance, benefiting from a much-expanded range of activities.

We achieved significant diversification without taking on bad debt. By year-end, the division had emerged as one of the largest corporate vehicle and asset leasing businesses in South Africa as well as a leading foreign exchange specialist.

Operating profit rose 16,1% to R639,5 million (2010: R551,0 million). There were no significant write-downs or write-offs.

Deposits showed pleasing growth to R1,3 billion (2010: R1,1 billion), reflecting the success of efforts to widen the customer base. Our business customers include growing numbers of listed companies.

Total assets at our refocused insurance business increased from R723,6 million to R884,4 million. Insurance policy volumes grew.

Our teams were tasked with achieving stronger marketplace positioning and by year-end the business enjoyed increasing recognition for creating the most effective pre-paid foreign currency debit and ATM card for overseas travellers, providing the sector’s widest range of foreign bank notes and offering the lowest cost bank account for unlimited banking transactions.

Our reputation as the bank offering the longest banking hours became a strong differentiator.

Bidvest Bank won the ACSA Feather Award as best landside retailer at Johannesburg’s OR Tambo International Airport – one of the most coveted awards in the airports industry. The bank also took the ACSA Feather Award as best financial services provider at Cape Town International Airport.

The bank currently carries the Moody’s rating of A3.za/P-2/za, with a stable outlook.

Sustainability

Our workplace environment continues to expand as our business grows. We launched a successful effort to create a unified culture as the business moved from its Rivonia premises to larger offices in Braamfontein. To support our people, our human resources function was significantly strengthened.

Teams from an automotive asset-based finance and insurance background rapidly adjusted to a much broader role. Without losing the benefits of their vehicle retailing roots, they increasingly grasp the wider potential offered by new positioning as providers of a wide range of insurance services to a broader customer base.

In line with our goal to improve BEE scores, we increased training initiatives, with spend per employee rising by almost 11%. We also increased our social investment spend, helping the division achieve Level 3 BEE contributor status.

Bidvest Bank is conscious of its environmental responsibilities. While the business has a fairly low direct impact, we are working towards paperless administrative systems as we develop new products in our niche markets. We recycle waste paper.