Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2004 Earnings Presentation
39 slides from Standard Bank's earnings presentation, Jun 30, 2004
Slide 1: Interim results presentation
Interim results presentation For the six months ended 30 June 2004 1
Slide 2: Financial highlights
Financial highlights Standard Bank
Slide 3: Financial highlights
Financial highlights June 2004 June 2003 % % Return on equity 23.0 22.5 Growth in headline earnings 14.6 23.0 Cost-to-income 55.9 54.9 Provision for credit losses 0.72 1.17 Headline EPS growth 13.7 22.6 DPS growth 21.7 22.0 3
Slide 4: Group income statement highlights
Group income statement highlights June June 2004 % 2003 Rm change Rm Net interest income 5 377 (8) 5 841 Provisions for credit losses 829 (26) 1 124 Non-interest revenue 7 139 17 6 085 Total income 11 687 8 10 802 Operating expenses 6 996 7 6 543 Taxation 1 418 3 1 377 Group headline earnings 3 389
Slide 5: Headline earnings analysis
Headline earnings analysis June June 2004 % 2003 Rm change Rm Domestic Banking 2 560 22 2 101 Retail Banking 1 274 26 1 011 Corporate and Investment 1 201 13 1 065 Banking Other domestic operations 85 25 Africa 297 19 249 International 371 (26) 499 Central funding and other 32 9 Standard Bank operat
Slide 6: Returns on equity
Returns on equity 2004 Cost of June 2004 June 2003 equity * % % % Domestic Banking 29.4 30.8 14.3 Retail Banking 30.1 28.2 Corporate and Investment 31.6 33.0 Banking Africa 29.9 31.3 18.2 International 13.1 16.8 USD 12.7 17.4 11.6 Standard Bank operations 24.2 23.9 14.0 Liberty 10.3 8.5 12.7 Standar
Slide 7: Headline earnings mix
Headline earnings mix 3% (2%) Retail Banking 38% (34%) 11% (17%) Liberty Africa Corporate and Investment Banking International Other 35% (36%) 4% (3%) 1H03 figures in brackets 9% (8%) 7
Slide 8: Major factors impacting the results
Major factors impacting the results 8
Slide 9: Major factors impacting the results
Major factors impacting the results • South African macro economic factors • Domestic Retail asset growth • Domestic margins • Credit experience and provisioning • Non-interest revenue growth • Cost management 9
Slide 10: South African macro economic factors
South African macro economic factors • Benign macroeconomic environment supported domestic banking in first half of 2004 • Continued rand strength • Strong consumer demand • Buoyant residential property market • Export and mining companies under pressure 10
Slide 11: Domestic retail asset growth
Domestic retail asset growth 11
Slide 12: Loans and advances - extracts
Loans and advances - extracts June June 2004 % 2003 Rbn change Rbn Domestic Banking 183 874 24 148 882 Retail Banking 129 350 32 97 984 Home Loans 76 537 38 55 498 Vehicle & asset finance 32 670 26 25 908 Card 6 673 31 5 112 Corporate and Investment 54 394 7 50 940 Banking International 35 592 (10)
Slide 13: Market share information
Market share information Jun ’04 Dec ’03 Dec ’02 % % % Total home loans 24.5 22.8 20.3 Retail home loans 21.5 19.8 17.3 Total instalment finance 22.5 22.3 21.7 Retail instalment finance 13.0 14.3 16.5 Credit card 30.9 28.8 24.9 Retail unsecured lending * 25.7 22.7 20.9 Retail branch deposits * 25.8
Slide 14: Home Loans
Home Loans • New business market share consistently between 25% - 26% • Comparatively young book with low fall off • Strong branch and mobile sales teams • Good arrangements with originators, estate agents and developers • Processing capabilities improved – Increasing volumes – Customer expectations
Slide 15: Home loan origination
Home loan origination 45% 40% 35% 30% 25% 20% 15% 10% Nov-03 Oct-03 Jul-03 Mar-04 May-04 Jun-03 Aug-03 Sep-03 Dec-03 Jan-04 Feb-04 Apr-04 Jun-04 Internal Channels Estate Agents/mobile sales force Originators 15
Slide 16: Home Loan balance growth
Home Loan balance growth 5,000 80,000 75,000 4,000 Monthly move- 70,000 Month end ment balance Rm 3,000 65,000 Rm 60,000 2,000 55,000 1,000 50,000 0 45,000 40,000 -1,000 35,000 -2,000 30,000 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Registrations LHS
Slide 17: Domestic margins
Domestic margins Standard Bank
Slide 18: Prime rate
Prime rate 19 17 15 13 2003 % 11 2004 9 7 5 November June January August March February July September December April May October Ave prime rate 535bp lower for the first six months of 2004 18
Slide 19: Domestic funds margin analysis
Domestic funds margin analysis % Margin at June 2003 (restated) 3.63 Lending Improved rates and higher retail asset component 0.40 Funding More reliance on wholesale funding (0.25) Endowment effect Lower interest earned on equity and transactional balances (0.66) Other Asset liability management and
Slide 20: Credit experience and provisioning
Credit experience and provisioning 20
Slide 21: Credit loss history
Credit loss history 6 5 4 % of advances 3 2 1 0 1998 1999 2000 2001 2002 2003 HY 2004 Income statement charge Balance sheet provision Gross NPLs 21
Slide 22: NPLs and balance sheet provisions
NPLs and balance sheet provisions June 2004 % Dec 2003 Rm change Rm Retail Banking 2 796 2 2 731 Corporate and Investment 850 (27) 1 169 Banking Other 524 (43) 913 Gross NPLs 4 170 (13) 4 813 Gross NPLs as a % of advances 1.8 2.1 Security and expected recovery 2 182 (22) 2 793 Net NPLs 1 988 (10) 2
Slide 23: Credit provisioning
Credit provisioning June June 2004 % 2003 Rm change Rm Charge for non-performing loans 638 (31) 929 (specific) Charge for performing loans (general) 191 (2) 195 Total income statement charge 829 (26) 1 124 Credit loss ratios (%) Group - non performing loans 0.56 0.97 Group - performing loans 0.17 0.
Slide 24: Provision for credit losses
Provision for credit losses • Retail Banking - 17% lower – NPL reduction in home loans and branch lending – Performing loan provision for market share gains • Corporate and Investment Banking - 88% lower – Lower credit defaults in an improved credit environment – Currency impact on corporate clients
Slide 25: Non-interest revenue growth
Non-interest revenue growth 25
Slide 26: Non-interest revenue
Non-interest revenue June % June 2004 increase 2003 Rm Rm Fee & commission revenue 4 613 19 3 871 Trading income 2 022 8 1 875 Other income 504 49 339 Total non-interest revenue 7 139 17 6 085 Split of trading income 2 022 8 1 875 Domestic Banking 682 25 545 International 1 168 1 1 151 Africa and ot
Slide 27: Sources of fee and commission revenue
Sources of fee and commission revenue % increase Retail Banking + 18% Number of ATM transactions 8 Number of internet transactions 33 Teller volumes 9 Bancassurance: number of active embedded policies 26 Card turnover 24 Africa + 31% Repricing initiatives following standardisation Number of accounts
Slide 28: Sources of fee and commission revenue
Sources of fee and commission revenue % increase Corporate and Investment Banking + 15% Business Online transactional volumes 15 International trade services transactional volumes 7 Advisory income growth International + 45% in USD Asset management fees 28
Slide 29: Cost management
Cost management Standard Bank
Slide 30: Operating expenditure
Operating expenditure June % June 2004 increase 2003 Rm Rm Staff costs 3 924 5 3 724 Other operating costs 3 072 9 2 819 Total costs 6 996 7 6 543 Domestic Staff costs 2 638 10 2 391 Other operating costs 2 288 9 2 104 30
Slide 31: Cost-to-income ratios
Cost-to-income ratios June 2004 June 2003 Dec 2003 % % % Domestic Banking 53.7 53.5 54.5 Retail Banking 61.0 60.6 60.2 Corporate and Investment 42.6 41.9 44.4 Banking Africa 60.9 58.8 57.2 International 63.6 57.7 61.2 Standard Bank operations 55.9 54.9 56.2 31
Slide 32: Capital adequacy
Capital adequacy Standard Bank
Slide 33: Capital adequacy
Capital adequacy 18 400 % Rbn June June 16 350 2004 2003 14 300 % % 12 Group 250 10 200 Primary 12.0 11.0 8 150 6 Total 15.4 14.6 100 4 2 50 SBSA 0 0 2000 2001 2002 2003 HY2004 Primary 9.2 7.8 Total 13.2 12.0 Primary capital Secondary capital Tertiary capital Risk-weighted assets 33
Slide 34: Proforma capital adequacy after BEE ownership deal
Proforma capital adequacy after BEE ownership deal Tier 1 Total Group % % At 30 June ’04 12.0 15.4 After proposed transaction 11.2 14.6 Target range 9 - 10 SBSA At 30 June ’04 9.2 13.2 After proposed transaction 8.4 12.4 34
Slide 35: Black ownership initiative
Black ownership initiative • Extensive discussions with shareholders • Costs upfront • Simple structure • Broad-based (our own people) • Meets Charter requirements • Long term commitment from strategic partners • Black staff retention and attraction 35
Slide 36: Looking forward
Looking forward Retail Banking • Asset growth has exceeded expectations • Benefit of asset growth to be more evident in second half of 2004 and in 2005 • Focus on customer acquisition through improved segmentation • Investment in IT and branch infrastructure Corporate and Investment Banking • Strong
Slide 37: Looking forward
Looking forward Africa • Retail in Africa gaining momentum, still a way to go • Alignment with rest of group • Actively looking for further acquisitions International • Improving on client revenues • Progress on group alignment with Corporate and Investment Banking and Africa 37
Slide 38: Looking forward
Looking forward Liberty • Improving fundamentals Group • Domestic economic outlook remains positive • Emerging markets continue to present opportunities • Black ownership initiative not expected to have material effect on 2004 earnings due to timing • Diversified portfolio • Remain committed to obje
Slide 39: Standard Bank
Standard Bank