Bidvest Group Limited

Financial Services

STATURE

Bidvest Bank is solidly positioned as a well-capitalised institution and major player in full maintenance leasing and foreign exchange. We remain prudent while broadening our customer base.

Bidvest Insurance Group is a growth-minded insurer that is rapidly expanding its product and service offering from its base as a leading value-added insurance services provider to a multi-faceted insurance group.

Moody’s Investors Service upgraded Bidvest Bank to A1 status, the best rating of all South Africa’s second-tier banks. The short-term insurance company, Bidvest Insurance Group, obtained a global credit rating of A.

MANAGEMENT

Leadership is increasingly characterised by a blend of youth and experience. Morale is high as it is clear strategic goals are being achieved as we grow our existing franchise and seek new opportunities to diversify the business.

Recognition as South Africa’s leading bank outside the Big Four is a signal to young, ambitious managers that exciting career opportunities can be found at Bidvest Bank.

VISION AND INNOVATION

We commit to excellence, partnership and market innovation. We are agile and receptive to change. We share the impatience felt by many of our customers with red tape and traditional banking practices that cost time while delivering few practical benefits.

We see the early identification of new opportunities as key to growth. For example, Bidvest Bank identified small, medium and micro-enterprises (SMMEs) as an underappreciated component of the corporate market and continues to grow on the back of market insights like this.

We achieve growth in tandem with excellence through partnerships with leaders such as Old Mutual (money market-enhanced savings), and Tradeflow (trade finance).

This vision of growth through partnership achieved significant gains in 2016.

NEW FOCUS

Creating a broader franchise is core to the strategic mission of both the insurance and banking businesses. Within this wider framework, we retain specialist focus as in-depth expertise allows us to add value for our customers.

Focus deepened as teams became “business owners” with A to Z responsibility in areas such as transactional banking, money transfers and deposits.

TRANSFORMATION

Transformation entails constant development of the business and commitment to B-BBEE as a strategic growth driver.

As a level 2 contributor to B-BBEE we commit to transformation while looking for ways to foster greater participation in the economy by black families and businesses. Our commitment to affordable banking solutions – waiving or reducing fees in many instances – is one example of our desire to make banking more inclusive.

Our SMME focus is designed to assist a new generation of entrepreneurs who expect their banking and insurance partner to add value without adding unnecessary costs.

Internally, black staff advancement remains a focus area. Black Africans and women sit on the Bidvest Bank executive committee. Black professionals head fleet finance and human capital.

Entry-level recruitment is predominantly black African across both banking and insurance. Training is constant and driven by increased diversification and innovation.

CONTINUITY

We have long been known as leading specialists in foreign exchange, fleet and asset finance and value-added vehicle insurance products. This strategic base is increasingly leveraged to enable growth into related areas. Bidvest’s longstanding reputation for prudence is echoed in our approach to banking and insurance practices.

INDUSTRY CONTEXT

A flat economy and mounting consumer pressure led to increased foreign exchange margin pressure. The rand’s strengthening cycle was generally negative and markets remained highly competitive. Original equipment manufacturers (OEMs) continued to expand into vehicle insurance, underlining the wisdom of diversification.

KEY FEATURES

• Divisional revenue rose to R3,3 billion (2015: R2,0 billion) with trading profit up 10,4% to R582 million (2015: R528 million).
• The bank and other forex businesses performed well. Revenue was R2,8 billion (2015: R1,6 billion) while trading profit was R464 million (2015: R357 million).
• Insurance revenue was R518 million (2015: R464 million). Trading profit was R118 million (2015: R171 million) as a result of weak equity markets in 2016.

BANKING

Moody’s upgraded Bidvest Bank to A1, with a stable outlook. The new rating is A1.za/P-1.za (up from A3.za/P-2.za).

Banking alliance growth gathered pace with expansion into acquiring (credit and debit card processing) via our partnership with First Data, a leader in point-of-sale payments. Trade finance growth continued while partnerships with Old Mutual made solid gains.

Fleet business achieved major public sector contract successes. Fleet and asset finance top-line income rose 71%.

Total advances, including leasing, were R3,2 billion (2015: R3,1 billion). Corporate advances rose to R1,7 billion (2015: R1,3 billion). Deposits were up 36,5% at R3,9 billion (2015: R2,8 billion).

Cash on hand was R2,5 billion (2015: R2,4 billion). Credit impairments remained relatively low at R26 million.

Business banking growth continued and our first corporate hub (in Umhlanga) did well.

The Tonbeller anti-money laundering system rolled out and work began on upgrading our global payments platform.

INSURANCE

Though weak equity markets affected overall results, product expansion accelerated. The business now offers travel, commercial, domestic and life products over and above its value-added products.

The business benefited from a full-year contribution by the broking arm (Compendium Insurance Brokers) and moved into commercial underwriting for the first time.

Pension administrator, Glassock & Associates, was acquired in March and made a good start.

Gross premiums rose to R437 million (2015: R362 million).

Domestic equity weakness persisted and our investment income from listed equity declined by R55 million for the year. The total investment portfolio is R1 billion (2015: R1,4 billion).

YEAR AHEAD

The bank will seek continued growth and diversification, while remaining prudent. The financial products market will stay fiercely competitive.

Business banking expects continued growth. A second business hub (in Gauteng) opens soon. Deposit growth and further broadening of the fleet franchise are a priority, as is the development of a mobile banking site. Trade finance and acquiring volumes are expected to grow. Possible bolt-on acquisitions are being considered for both banking and insurance businesses.

Bidvest Insurance targets significant growth. A bigger travel insurance contribution is expected and Glassock’s first full-year contribution will enhance returns. The move into commercial underwriting has proved positive. FMI, a life insurance underwriting manager, was acquired after year-end and will improve the life insurance product offering and distribution.