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1
Financial results
for the year ended 31 December 2007
2
Financial highlights
≤53.5
≤0.75
24.0
+16.5%
Financial objectives
20
21
21
21
Change %
52.752.0Cost-to-income ratio* (%)
0.600.78Credit loss ratio (%)
25.424.8ROE (%)
3 5484 255NAVPS (cents)
320.0386.0DPS (cents)
783.7947.5Diluted HEPS (cents)
796.4960.6Headline EPS (HEPS) (cents)
20062007
Financial results are stated on a normalised basis where applicable
* Excluding MasterCard capital profit
2
3
Operating environment in 2007
● 1H07
– Generally favourable operating conditions• despite 50bp interest rate hike in South Africa
– Headline earnings grew 27%
● 2H07
– Dislocation in global credit markets– Global tightening in liquidity– Retail slowdown towards the end of the year
• interest rates increased by a further 150bp in South Africa
– Headline earnings grew 17%
4
Group income statement highlights
19 1052924 706Operating expenses
22
15
22
68
29
35
Change %
10 81813 153Normalised headline earnings
843973Liberty contribution
9 97512 180Banking activities
2 7334 590Credit impairment charges
19 16524 747Non-interest revenue
17 00122 896Net interest income
20062007
3
5
335396
471558
666
796
961
124 151232 267
320386
102 0
200
400
600
800
1 000
1 200
2001 2002 2003 2004 2005 2006 2007
Headline EPS DPS
cents
Group headline earnings and dividends per share
CAGR 19%
CAGR 25%
6
Business unit review
27.3346 765Corporate & Investment Banking
22
15
22
18
Headline earnings
growth %
24.813 153Standard Bank Group
25.8973Liberty Life
24.712 180Banking activities
(246)Central funding and other domestic
28.15 661Personal & Business Banking
ROE %
Headline earnings
Rm 2007
4
7
Business unit review Geographic snapshot
981 229Outside Africa
581 269Rest of Africa
1510 805South Africa
22
75
15
15
Headline earnings growth %
13 153Standard Bank Group
(150)Central funding
2 498Outside South Africa
973South Africa (Liberty Life)
9 832South Africa (Banking operations)
Headline earningsRm 2007
8
Headline earnings mix by major business unit
-1%(2006: 1%)
51%(2006: 46%)
7%(2006: 8%)
43%(2006: 45%)
Personal & Business Banking Corporate & Investment BankingCentral & other Liberty Life
5
Balance sheet analysis
10
Loans and advances
3215040209Customers
10493164Instalment sales
3173122Card debtors
512
5
89
239
32
170
268
Dec 2006 Rbn
100
1
15
48
6
33
52
2007 mix %
28
11
29
24
29
29
Change%
657Gross loans and advances
4Central
99Banks
308Corporate & Investment Banking
40Other lending
219Mortgage loans
345Personal & Business Banking
Dec 2007 Rbn
6
11
Funding
2513333177Wholesale priced
3143619Securitisation
4177129Money market
545
300
102
120
253
Dec 2006 Rbn
100
54
18
21
46
2007 mix %
29
27
27
26
30
Change %
705Deposit and current accounts
380Corporate & Investment Banking
129Intragroup from CIB
152Retail priced
329Personal & Business Banking
Dec 2007 Rbn
12
Liquidity
● Continuous focus on liquidity– Group long-term funding ratio increased to 17.8% (2006: 15.5%)– Emphasis on structural liquidity mismatch, inclusive of contingent
liabilities– Surplus liquidity buffer
• R60bn in excess of prudential liquid asset requirements
● Increased reliance by local banks on domestic term funding– SA 5yr CD now pricing in excess of 200bp
● Securitisation demand weak in second half
● Concentration risks in deposit base managed closely
● Limited exposure to conduits– R13bn total exposure
7
Income statement analysis
14
Margin on interest earnings assets
4 397Volume
0.04214Other treasury and banking activities
0.04209IAS 39 discount unwind
24 0981 005
(508)
1 625(169)
(147)
17 472NII Rm
0.28Endowment effect of higher rates(0.03)Funding
(0.03)LendingRate related changes
3.63Restated margin on interest earning assets for 2006
3.94Margin on interest earning assets for 20070.02Acquisitions0.08Changes in balance sheet composition
(0.09)Surplus liquidityBalance sheet related changes
Margin %
8
15
Non-interest revenue
157>100459MasterCard disposal
29
25
(21)
24
21*
49
23
Change %
19 16524 747Total non-interest revenue
769961Insurance related revenue
743584Property related revenue
8191 016Banking and other
2 4883 020Other revenue
4 8527 216Trading revenue
11 82514 511Net fee and commission revenue
20062007
* Growth excluding MasterCard 10%
16
Credit impairment charges
1.344 2405503 690Personal & Business Banking
0.784 5908263 764
68
100
250
Total charge
Rm
16
100
176
PL charge
Rm
86Change %
Central and other
0.0974Corporate & Investment Banking
Creditloss ratio
%
NPL charge
Rm2007
1.002 3334181 915Personal & Business Banking
2 733
65
335
711
65
228
0.602 022
Central and other
0.15107Corporate & Investment Banking
2006
9
17
Credit impairment trends
0.991.07
0.90
0.43 0.40
0.60
0.78
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
2001 2002 2003 2004 2005 2006 20070.0
0.5
1.0
1.5
2.0
Credit impairment charges on NPLs Credit impairment charges on PLsCredit loss ratio (%) Average prime lending rate in SA (%)
Rm
13.8
15.815.0
11.310.6
11.2
13.2
18
Operating expenses
293 755Corporate & Investment Banking
2610 218Other
21
42
29
32
Change%
6 835Personal & Business Banking
6 739Corporate & Investment Banking
7 336Personal & Business Banking
14 488Staff
2007Rm
● Total costs up 29%
– Excluding acquisitionsup 23%
● Staff costs
– Headcount up 17% of which 9% is from acquisitions
– Increased incentive pay
● Other costs
– IT costs up 24%– Higher levels of business
activity– Continued expansion
10
19
Cost-to-income ratioexcluding MasterCard capital profit
57.2 56.9 55.7 56.9 55.2 52.7 52.048
50
52
54
56
58
60
62
64
2001 2002 2003 2004 2005 2006 20070
5
10
15
20
25
30
35
Cost-to-income ratio Income growth Cost growth
% ratio % growth
Capital management
11
21
Group return on equity
1 939 1 957 2 154 2 464 2 830 3 548 4 255
20.1 20.322.6 23.7 25.2 25.4 24.8
17.8 1714.8 13.4 12 12.6 13.4
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
2001 2002 2003 2004 2005 2006 20070
10
20
30
40
NAV per share ROE Average cost of equity
cents %
CAGR 14%
22
Capital adequacyBII conversion
Risk-weighted assets4654461Credit risk177(66)243Personal & Business Banking28569216Corporate & Investment Banking
312Central & other54(9)63Trading/market risk5656-Operational risk
57551524Banking activities
762
1955
Dec 07BI
Rbn
65(11)Banking activities2-Tier 3
14(5)Tier 249(6)Tier 1
Available qualifying capital
Dec 07Pro-forma BII
RbnChange
Rbn
12
23
Capital adequacy ratios
Pro-forma
11.38.511.48.1Basel II
9.757.09.757.0Basel II regulatory minimum
14.410.412.58.6Basel I
15.0Debt capital headroom (Rbn)
Total %
GroupSBSA
11.2
Tier 1 %
14.0Including ICBC capital
Total %Tier 1 %
Peter Wharton-Hood
13
25
Overview of results
● Customer acquisition strategies over the past three years were appropriate
● Geographic diversification benefits starting to show
● Market pressures dampened retail momentum, but no surprises
● Substantial increase in credit impairments
● Interest income boosted by the endowment effect
● Significant bancassurance progress made
● Good progress made in addressing regulatory challenges
● Implementation of Basel II
26Source: South African Reserve Bank
Current market conditions
45
50
55
60
65
70
75
80
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20075
6
7
8
9
10
11
12
13
14
15
Debt to disposable income of households (LHS) Debt repayment to disposable income (RHS)
% %
14
27
Financial highlights
● Headline earnings up 18% to R5 661m
● Credit loss ratio 1.34% (2006: 1.00%)
● ROE 28.1% (2006: 31.6%)
● Cost-to-income ratio 52.1% (2006: 53.8%)
● External net advances up 28% to R340bn
28
Abridged income statement
11 3342514 171Operating expenses
811421 150Other revenue
8 9481710 468Net fee and commission revenue
7 244208 664Net income
18
82
29
19
39
Change%
4 8165 661Normalised headline earnings
2 3334 240Credit impairment charges
20 91127 075Total income
9 759 11 618Non-interest revenue
11 15215 457Net interest income
Dec 2006Rm
Dec 2007Rm
15
29
Product reporting
2 913243 61412 0613015 731Transactional and lending products
300233703 025303 937Card
520437421 467271 860Bancassurance
Headline earnings Total income
20 911
1 561
2 797
Dec 2006
Rm
5 661
110
825
Dec 2007
Rm
18
(4)
(15)
Change %
29
40
20
Change %
4 81627 075Personal & Business Banking
1142 191Vehicle and asset finance
9693 356Home loans
Dec 2006
Rm
Dec 2007
Rm
30
Credit impairments
1.32
1.83
6.55
1.51
0.61
Jun 2007%
1.001.34Personal & Business Banking
1.572.01Other
7.037.20Card
1.091.49Vehicle and asset finance
0.270.54Home loans
Dec 2006%
Dec 2007%
16
31
Home loans NPLs - credit impairments
80.4(1 906)82.7(3 612)79.8(4 325)Net security
3864461 054I/S charge for NPLs
253353596Time value discount
4657561 098Net exposure
4657561 098NPL provision
170 112193 914219 177Book size
2 3714 3685 423NPLs
(2 159)(3 965)(4 921)Security
0.27
Dec 2006 Rm
% of NPLs
% of NPLs
0.61
Jun 2007 Rm
0.54Credit loss ratio
% of NPLs
Dec 2007 Rm
32
Early arrears in SBSA (special mention category)
Source: DI500
1.8
1.11.0
2.1
2.82.1
3.43.1
1.9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jun04
Sep04
Dec04
Mar05
Jun05
Sep05
Dec05
Mar06
Jun06
Sep06
Dec06
Mar07
Jun07
Sep07
Dec07
Home loans VAF Card
%
17
33
Non Performing Loans in SBSA
1.6
1.9
2.62.4
1.4
1.1
2.6
2.3
2.3
0.5
1.0
1.5
2.0
2.5
3.0
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Home loans VAF Card%
Source: DI500
34
Retail market share in South Africa
Source: DI900
36.036.0
30.329.327.726.8
22.321.5
13
17
21
25
29
33
37
2000 2001 2002 2003 2004 2005 2006 2007
Card Home loans adjusted for securitisation Deposits Vehicle and asset finance adjusted for securitisation
%
18
35
Secured lending - Home loans
● Globally the book increased 29%
● Value of new registrations in South Africa starting to slow, up 9%(2006: up 43%)
● Margin compression continues
– Continued dependence on more expensive wholesale priced funding
● Contribution from Rest of Africa still small
– introduction of product into Botswana, Lesotho, Mozambique, Kenya, Swaziland and Uganda completed in 2007
36
Secured lending - Home loans
● Credit– Average loan to value and instalment to income ratios of new
business in South Africa remain stable • 81% and 25% respectively
– 67% balance to original value on portfolio in South Africa is well within expectations
– Portfolio well provided
19
37
Secured lending - Vehicle and asset finance
● Globally the book increased 31%● Re-entry into dealership origination channel in South Africa● Strong volume growth boosted by corporate and commercial market
despite year-on-year decline of 5% in vehicle sales in South Africa● Argentina performed well ● Expansion of product offering into all African countries boosted
contribution from Rest of Africa● Credit
– Larger proportion of non-Standard Bank customers acquired through dealership origination channel
– Declining recovery values in used car market have triggered increased impairments
– Improved asset disposal procedures have mitigated losses
38
Unsecured lending - Card
● Consolidation after 3 years of strong growth
– Number of credit card accounts up 2% to 2.3 million with increase in revolving customers
– Cardholders spend up 6%, slow down evident in 4th quarter– Book increased by 31%
● Acquiring revenue up 9% with strong growth in debit card spend
– Acquiring new customers at a slower rate
● Growing card portfolios in Botswana, Namibia, Lesotho and Swaziland
● Credit
– Impairment levels reflect the tightening economic environment and portfolio maturation
– Within management target of 700 to 900 bps
20
39
Unsecured lending - Other lending
● Good growth in credit utilisation, specifically in demand portfolios
– Book increased by 24%– Number of accounts up 12%
● SMMEs starting to show signs of stress, SMEs more resilient in line with corporate sector
● Credit provisions in line with expectations
40
Transaction and investment products
● Continued focus on sales yielded further volume increases
– Number of transactional accounts up 9%– Fees and commissions up 13%
● Average business current account balances up 22%
● Average investment balances up 32%
● Widening deposit margins from positive endowment effect
● Strong product sales in lower end of market
● Mzansi account base in excess of 620 000 (2006: 439 000)
21
41
Distribution
5Growth in branch based transactions
13Growth in number of ATMs
3Growth in number of ATMs
28
2821
23
0
5
%
Growth in internet users
Growth in number of branches*
Growth in ATM transactions
South Africa
Growth in internet users
Growth in number of branchesGrowth in ATM transactions
Rest of Africa
* 21 opened, 24 closed/integrated
42
Bancassurance
● Significant progress made in aligning sales processes with Liberty Life
● Co-operation levels outside South Africa gaining traction
● Holistic wealth model in design stage with Liberty Life
● SBFC responsible for a 28% increase in risk premiums and investment capital channelled into the group
● Embedded product volumes increased by 21%
22
43
Outlook for Personal & Business Banking- South Africa
● Interest rate outlook will continue to dampen consumer and SMME credit demand
● Volume and asset growth rates likely to moderate
● Continued focus on risk management and collections
● Focus on sensible cost management without compromising business investment
● Well positioned to continue serving transactional requirements of all customers
● Focus on regulatory compliance continues
44
Outlook for Personal & Business Banking- Rest of Africa
● Stronger focus on countries with higher earning potential
● Leverage acquisition in Nigeria
● Replication of proven South African service led sales strategies
● Improve customer service and fine-tune relevant and appropriate product offerings
● Leverage newly launched products to deepen penetration into higher/mid value customer segments
● Continued expansion of channel offerings – mobile banking and business on-line
● Further investment in the physical network
23
45
Argentina
● Headline earnings attributable to the group R129m in 2007
● People, processes and systems aligned with and integrated into the group
● Significant “overnight” rebranding exercise completed
– Achieved substantial awareness
● Service led sales strategies implemented in Personal & Business Banking with broader segment focus
● Successful client retention strategies in Corporate Banking resulted in limited deposit run-off
● Newly established Investment Banking team gaining momentum
● Headline earnings of US$40m expected in 2008– Of which 77% will accrue to Standard Bank
Ben Kruger
24
47
Overview of results
● Execution of our strategy starting to pay dividends
● Good diversification of earnings across all geographies and products
● Cross sell and leveraging of activities globally
● Integration of Nigeria and Turkey well under way
● No direct exposure to subprime, but some adverse effects from a secondary perspective
● Intensified focus on risk and capital management
● Implementation of Basel II
48
Financial highlights
● Headline earnings up 34% to R6 765m
● Credit loss ratio 0.09% (2006: 0.15%)
● ROE 27.3% (2006: 27.7%)
● Cost-to-income ratio 52.6% (2006: 52.6%)
25
49
Abridged income statement
7 6423710 494Operating expenses
4 945507 423Trading revenue
1 461(2)1 435Other revenue
2 929404 094Net fee and commission revenue
6 475399 012Net income
34
(25)
37
39
33
Change%
5 0336 765Normalised headline earnings
335250Credit impairment charges
14 45219 756Total income
9 33512 952Non-interest revenue
5 1176 804Net interest income
Dec 2006Rm
Dec 2007Rm
50
Operating expenses
● Staff cost increase due to higher incentive based remuneration, hiring of high calibre key staff and acquisitions
● Other operating expense growth largely attributable to higher levels of business activity and continued expansion
● Higher IT and infrastructure spend due to roll-out of key platforms in Africa and Outside Africa
● Implementation of Basel II
293 755Other operating expenses
42
37
Change%
6 739Staff costs
10 494Operating expenses
Dec 2007Rm
26
51
Income contribution
35 40 39 35 36 35 34
34 3534 33 34 38
32 26 26 31 31 31 28
33
0102030405060708090
100
2001 2002 2003 2004 2005 2006 2007
Net Interest Income Trading revenue Fee and commission income
%
52
Divisional contribution
Headline earnings Total income
14 452
5 518
2 717
6 217
Dec 2006
Rm
6 765
2 517
1 630
2 618
Dec 2007
Rm
34
68
6
31
Change %
37
54
26
27
Change %
5 03319 756Total
1 4978 473Global Markets
1 5403 413Investment Banking
1 9967 870Banking and Trade Finance
Dec 2006
Rm
Dec 2007
Rm
27
53
Banking and trade finance
● Income R7.9bn, up 27%, headline earnings R2.6bn, up 31%
● Good growth in term lending and commercial property finance
● Growth in cash management and overnight deposits
● Lower credit impairment charges
● Additional fee revenue from the first time inclusion of Argentina and Nigeria
● Contribution from volume growth in transactional banking offset by pricing pressure
54
Investment banking
● Income R3.4bn, up 26%, headline earnings R1.6bn, up 6% off a high base
● Strong performance from M&A and advisory
● Robust asset financing recorded across geographies
● Project finance franchise growing, notably in mining & resources, infrastructure and telecoms sectors
● Good contribution from private equity and unlisted investment portfolios
● Lower investment gains on the property portfolio
● Expanding the Investment Banking franchise in Africa and Internationally
28
55
Global markets
● Income R8.5bn, up 54%, headline earnings R2.5bn, up 68%
● Strong result, notwithstanding volatile market conditions
● Excellent performance from debt capital markets, resources, foreign exchange and equity derivatives
● First time inclusion of Argentina and Nigeria
● Higher level of principal account trading profits
● Improved scale and contribution in all businesses outside of South Africa
● Strong team with heightened risk management awareness
56
Current market conditions
● Global Financial Markets
– Significant subprime and secondary effects still emerging– Evaporating liquidity– Heightened risk aversion– Effective closure of Securitisation Markets– Increasing probability that the US economy is sliding into a
recession– Knock-on effects of US slowdown on Emerging Markets
● South Africa
– Credit markets weakened sharply since October 2007
29
57
10
20
30
40
50
60
70
May-07 Jul-07 Sep-07 Nov-07
ITra
xx s
prea
d (b
ps)
100
150
200
250
300
EM
BI+
spr
ead
(bps
)
ITraxx EMBI
Mar-07
Risk management Interpretation of market events
● Subprime crisis
● Liquidity crunch
● Asset repricing and de-leveraging
iTraxx Main s7 vs EMBI+
During the first bout of stress,EM reacts relatively slowly
and avoids the worst
In the second round, EM ismuch more closely correlatedwith Western Credit Markets
58
Risk management Interpretation of market events
South African Sovereign 5-yr CDS vs. iTraxx Europe Crossover Series 7 and EMBI spreadsNormalised Indices (Base Date 22 March 2007)
Pric
e
0%
100%
200%
300%
400%
500%
SOAF iTraxx Xover 7 EMBI+
22 Mar2007
25 Apr2007
31 May2007
9 Jul2007
14 Aug2007
14 Sep2007
22 Oct2007
23 Nov2007
31 Dec2007
22 Jan2008
30
59
Risk management Credit quality
● Credit quality of portfolio has improved
● Approval obtained from Regulator for AIRB approach to credit risk
● No direct exposure to sub prime
● Moving to an economic capital credit decision making model
60
Macro credit hedge
● Implemented Macro Credit Hedge during first half of 2007, targeted at protecting CIB against an anticipated downturn in credit markets
● Countries targeted were those where CIB had the largest exposureconcentrations
● Hedge positions were actively managed during 2007 to maintain similar levels of protection during market movements
● Hedge has performed well, providing cover during periods of market turbulence
● Hedge continues to be maintained
31
61
Risk management– Value at Risk / Trading Revenue
Income realised on 233 days in trading units
-150
-100
-50
0
50
100
150
200
2-Ja
n-07
12-J
an-0
724
-Jan
-07
5-Fe
b-07
15-F
eb-0
727
-Feb
-07
9-M
ar-0
7
22-M
ar-0
73-
Apr
-07
17-A
pr-0
7
30-A
pr-0
711
-May
-07
23-M
ay-0
7
4-Ju
n-07
14-J
un-0
726
-Jun
-07
6-Ju
l-07
18-J
ul-0
730
-Jul
-07
10-A
ug-0
7
22-A
ug-0
73-
Sep
-07
13-S
ep-0
7
26-S
ep-0
78-
Oct
-07
18-O
ct-0
7
30-O
ct-0
79-
Nov
-07
21-N
ov-0
73-
Dec
-07
13-D
ec-0
728
-Dec
-07
Income of trading units VaR
62
Trading Revenue– daily income distribution
01020
30405060
708090
> -40
-40 --30
-30 --20
-20 --10
-10 -0
0 -10
10 -20
20 -30
30 -40
40 -50
50 -60
60 -70
70 -80
80 -90
90 -100
<100
Frequency of trading days
32
63
Nigeria update
● Headline earnings R247m (2006: R49m)● Merger effective 24 September 2007● Group risk governance framework introduced● Operations and systems integration completed December 2007● Staff integration complete, Chris Newson appointed CEO● Market leading position in Global Markets, Investment Banking and
Asset Management● Optimistic on the potential for Personal & Business Banking● Good progress to date in very competitive markets, but significant
investment required in branch and ATM infrastructure● Improved position in key priority market● Headline earnings in excess of $100m expected in 2008
– Of which 50.1% will accrue to Standard Bank
64
Outlook
● Continue heightened awareness on risk management and pricing
● Increased focus on cost discipline in demanding revenue environment
● Ongoing development of human capital
● Optimise infrastructure roll-out
● Active capital management
● Maintain earnings momentum with balanced focus on growth opportunities
● Well positioned in terms of asset quality, business mix and dealpipeline facilitating on-going customer focus
● Cautiously optimistic re 2008 subject to market environment
33
Jacko Maree
66
Liberty Life
● Liberty Life now owns 100% of Stanlib
● Contribution to headline earnings up 15%
– 7% of group headline earnings
● Weighted average investment return 14.76% (2006: 33.00%)
● Return on embedded value 19.5% (2006: 22.4%)
● Indexed premiums up 14%
34
Jacko Maree
68
2007 – a momentous year
● Weathered global financial market stresses not seen in the last decade
● Finalised acquisitions in the important emerging markets of Nigeria, Argentina and Turkey
● Negotiated and gained necessary approvals for the historic transaction between Standard Bank and ICBC which resulted in
– valuable strategic position– significant injection of tier one capital in a cost effective manner– supportive shareholder
● Achieved financial results that exceeded published objectives for headline earnings per share growth and return on equity
35
69
Post year end
● Global economy
● South African economy and business environment
● Basel II
● ICBC
– New capital injection is dilutive in the short term but extends our growth horizon in the longer term
– Strong capital ratios a competitive advantage– Business co-operation commences in March 2008
70
Conclusion
● Geographic diversification pays off
● Growth in SA expected to moderate to more “normal” levels from exceptional growth of the past 4 years
● Growth in chosen African countries likely to significantly exceed growth rate in SA, assisted by ICBC business co-operation
● Capital injection allows us to consider further acquisitions in a more “acquisition-friendly” environment
36
71
Financial objectives
Continuous improvement
≤ 1.00%
CPIX + 10%
22.5%
Medium term
≤ 51%Cost-to-income ratio
≤ 1.00%Credit loss ratio
CPIX + 5%Normalised growth in headline earnings per share
21.0%Normalised ROE
2008
Medium term objectives remain unchanged