Standard Bank Group Limited · JSE:SBK
Standard Bank — Investor Day (July 2004)
46 slides from Standard Bank's investor day presentation, July 2004
Slide 1: ING SA Retail Banking Analysts Day
ING SA Retail Banking Analysts Day July 2004 Peter Wharton-Hood 1
Slide 2: Agenda
Agenda Quick positioning Challenges identified Progress to date Retail Banking in the rest of Africa Looking ahead 2
Slide 3: Quick positioning
Quick positioning 3
Slide 4: Standard Bank Group headline earnings mix
Standard Bank Group headline earnings mix December 2003 - Total headline earnings R6.2bn, USD828m 13% (8%) 40% (41%) Retail Banking Liberty Africa Stanlib Corporate and Investment Banking 34% (35%) 4% (6%) International 1% (1%) 8% (9%) 2002 figures in brackets 4
Slide 5: Retail financial highlights
Retail financial highlights Dec ’03 Dec ’02 Headline earnings (Rm) 2 542 2 162 ROE (%) 32.3 32.1 Cost-to-income ratio (%) 60.2 60.8 5
Slide 6: Select retail market share information
Select retail market share information May ’04 Dec ’03 Dec ’02 Dec ’99 % % % % Home loans 21.2 19.8 17.3 16.7 Vehicle and asset finance 13.1 14.3 16.5 18.9 Credit card 30.2 28.8 24.9 21.7 Branch lending (personal and unincorporated businesses) 25.3 22.7 20.9 23.6 Branch deposits (personal and uninco
Slide 7: In excess of 5 million customers
In excess of 5 million customers 1% 1% 6% Staff Priority Gross monthly income >R33 000 Business 30% Affinity Gross monthly income >R5 000 and <R33 000 62% Convenience Gross monthly income <R5 000 7
Slide 8: Retail points of representation
Retail points of representation Dec ’03 Dec ’02 Dec ’99 Number of branches 708 682 740 Number of ATMs 3 097 2 963 2 583 8
Slide 9: Challenges identified
Challenges identified 9
Slide 10: Challenges identified in 2001
Challenges identified in 2001 • People • Service • Sales • Processes • Costs • Product proliferation 10
Slide 11: Progress to date
Progress to date 11
Slide 12: Customer
Customer • Re-evaluation of value proposition and segmentation – Competitor activity – Economics • Alignment of product offerings to match propositions • Determination of changes required to distribution model • Identification of performance management (scorecard) adjustments (already growing market
Slide 13: Home Loans
Home Loans • New business market share consistently at 25% • DreamStart launched to low income earners • Successful mobilisation of the branch network / mobile force • Processing remains a real challenge – Increasing volumes – Customer expectations • Good relationship with originators • Fairly young
Slide 14: Home loan origination
Home loan origination 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% Nov-03 Oct-03 May-03 Jul-03 Mar-04 May-04 Jun-03 Aug-03 Sep-03 Dec-03 Jan-04 Feb-04 Apr-04 Internal Channels Originators Estate Agents 14
Slide 15: Home Loans: new business registrations per month in 2003
Home Loans New business registrations per month in 2003 3,000 2,700 2,400 2,100 Rm 1,800 1,500 1,200 900 600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ABSA Nedcor FNB Standard 15
Slide 16: Home Loans: net growth per month per DI900
Home Loans Net growth per month per DI900 3,000 2,500 2,000 1,500 Rm 1,000 500 0 -500 Jan- Jan- Mar- Apr- May- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- 03 03 03 03 03 03 03 03 03 03 03 03 03 04 04 04 04 Standard Bank ABSA Nedcor FNB 16
Slide 17: Home Loans credit management
Home Loans credit management • Pre-Legal trends – Continue to decrease as a percentage of the book in line with improved processes • Legal trends – NPLs continue to decrease as a percentage of the book – Better economic environment and improved controls • Trends in PIPs – 40% decrease in PIPs over t
Slide 18: Vehicle and asset finance
Vehicle and asset finance • Name change from Stannic • Closer alignment at branch and support services levels • Well diversified book (motor business 61%) 18
Slide 19: Credit card
Credit card • Market share increase from 21.7% in 1999 to 30.2% May 2004 • Master Card relationship hugely beneficial • Fee income up as a result of – New customer accounts – Price increases • Focussed branch support • Successful EDS migration 19
Slide 20: Branch lending
Branch lending • Margins improved due to the adoption of risk based pricing • Balance growth achieved through successful pre-approval campaigns • Improved collection processes • Pre-approved loan offerings bundled with current account opening 20
Slide 21: Transactional banking
Transactional banking • New customer acquisition supported by debit order switching • Retention initiatives • Pricing simplification • Banking the unbanked – Mzansi bank account (NBA) • 2,8m active E Plan accounts at Dec 2003 21
Slide 22: Key E Plan revenue drivers
Key E Plan revenue drivers • % of accounts with electronic salary deposit • Number of non-zero accounts • Total balances • Average balance per non-zero accounts • Number of transactions per account 22
Slide 23: Bancassurance
Bancassurance • Embedded product penetration significantly up • Co-operation with Liberty working particularly well • Complex products affected by market conditions • Over 80% of new business placed with Liberty and Charter 23
Slide 24: Distribution
Distribution Branch network • Customer satisfaction results reached a record high • Distribution planning process substantially improved • Sales processes monitored by product / by branch • Renewed emphasis on people planning processes Direct distribution • Significant expansion in ATM presence – 14
Slide 25: Retail Credit
Retail Credit • Integration and alignment proceeding well • Significantly improved collection processes • Improved use of systematic decision processes • Pre-approval processes benefiting sales • Improved risk modelling • Improved provision adequacy levels • Continued systems enhancements to improve
Slide 26: Retail in the rest of Africa
Retail in the rest of Africa 26
Slide 27: Africa retail potential
Africa retail potential Private Banking (0.1m ) SME (0.5m) Affluent (0.9m) Salaried (Middle and Lower) (10m) Trader (10m - 15m) Regularly Paid (8m) Irregular income earners (140m) 27 Sized based on countries in which we are represented (excl. SA)
Slide 28: Competitive environment
Competitive environment • At independence multinational banks dominated • 3 types of banks now exist – Multinational banks • Focus on wholesale and retail corporate employees - limited small business banking • Standard product range – Government commercial banks • Serve the lower end of the retail m
Slide 29: What we have
What we have • Countries in different stages of development – Financial services industry – Infrastructural challenges – Payments limitations • Our banks in different stages – Established retail position – Integration of acquisition – Emerging retail position • Weak product/package/brand/sales/servi
Slide 30: Overview of current network
Overview of current network Country Emphasis on Retail market Number of Number of retail share POR’s ATMS Lesotho ◕ 60% 19 24 Malawi ◕ 35% 21 23 Swaziland ◕ 45% 15 18 Namibia ◕ 30% 38 97 Uganda ◕ 38% 67 60 Zimbabwe ◑ 10% 15 21 Mozambique ◑ 15% 25 21 Botswana ◔ 5% 6 11 Zambia ◔ 3% 7 6 Ghana ◔ 1% 3 0
Slide 31: Challenges
Challenges • High circulation of funds outside formal banking system • Informal substitutes have filled traditional banking space • Relatively low percentage of salary earners • Capital locked up • People skills, communications, tech/touch trade-off 31
Slide 32: Priorities
Priorities • Build the basics and drive the bottom line • Leverage our infrastructure/competencies/ partners to get volume • Provide real value for money • Keep costs down and optimise processes • Use capital strategically • Leverage our infrastructure/ competencies/partners to get volume • Enhance
Slide 33: Looking ahead
Looking ahead 33
Slide 34: Current state of the market
Current state of the market • Domestic Retail Banking in a mature phase – Established competition – Relatively high market saturation • Despite recent outperformance, SBSA balance growth has matched the competition over the last 3 years • Forecast anticipates: – Slower revenue growth – Less conserva
Slide 35: Revenue growth drivers
Revenue growth drivers A pragmatic approach should consider the following key areas: • The absolute number of accounts held • The nature of the product holdings • The balances held in the accounts • The margin attributable to the specific products • The number of products held by each customer 35
Slide 36: Revenue growth drivers
Revenue growth drivers • Convenience banking accounts for 72% of customers and yields 15% of revenue • Affinity, Priority and SME account for 28% of customers and 85% of revenue • Product holdings remain low: Mass 1.05; Affinity 2.02; Priority 3.06 • Bank revenue per customer increases exponentially
Slide 37: The cost challenge
The cost challenge • Resource allocation historically biased towards products, channel and IT • Segment and sales processes received limited investment • Routine processes expensive as a result of duplication • Silo structures drive process complexity and unnecessary duplication • Narrow reporting r
Slide 38: The structural challenge
The structural challenge • Channels and processes have been developed and maintained independently • Disjointed marketing has resulted in fragmented customer data • Silo distribution across a complex range of products has led to inconsistent service levels • Offerings developed to address product en
Slide 39: A subtle change in emphasis
A subtle change in emphasis • “Waves” of thinking have moved between product, channel and segment dominance • The technology bubble of 4 years ago allowed infrastructure and channel to dominate product and segment • The emphasis on income statement deliverables allowed product to then dominate chann
Slide 40: A subtle change in emphasis
A subtle change in emphasis • Any single dominance is not sustainable • With these principles in mind: – Customer propositions must be a key driver of business purpose – Complementary, multi channel, customer selected distribution must be provided – Pro-active sales processes must be designed – End
Slide 41: Structural equilibrium
Structural equilibrium Retail Product Distribution and Ops Customer Wealth Home Loans Physical Distribution Marketing Private Banking Card Direct Distribution Customer insight SBFC Stannic Business Operations Customer Integration SET Transactions Information technology Segment co-ordination SBIS Len
Slide 42: Challenges
Challenges • Group – Retail Africa co-ordination – Wealth interface with Liberty • Customer – Business Banking and SME integration – Communication – Segmentation model completion • Distribution – Branch network upgrade plan – Branch infrastructure redesign – Security enhancements and improvement 42
Slide 43: Challenges
Challenges • Product – Pricing in a low interest rate environment • People – Leadership development – Talent management pipeline (from recruitment to retention) – Performance management • Operations – Process engineering a consistent back end model – Quality control in large volume “shops” 43
Slide 44: Challenges
Challenges • General – Sustained levels of service and sales performance – Ensuring best advice in a difficult sales environment – Maintaining regulatory compliance – Appropriate cost containment – Develop response to foreign competition – Financial Sector Charter 44
Slide 45: Retail banking - the winning formula
Retail banking - the winning formula • People • Strategy • Execution 45
Slide 46: Standard Bank
Standard Bank