Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2001 Earnings Presentation
61 slides from Standard Bank's earnings presentation, 2002
Slide 1: Financial Results Presentation, Year ended 31 December 2001
Standard Bank Investment Corporation Financial Results Presentation Year ended 31 December 2001
Slide 2: Presentation structure
Presentation structure • Financial highlights • Retail Banking • SCMB • Commercial Banking • Stanbic Africa • International Operations • Liberty Group • Conclusion
Slide 3: Key financial statistics
Key financial statistics Value created for shareholders Standard Bank Group Dec’01 % Dec’00 change Headline earnings Rm 4 438 21 3 673 Translation gain Rm 4 037 723 Headline EPS cents 337 19 283 Cost-to-income ratio % 57.3 58.8 Headline ROE % 20.0 22.4 Total ROE % 38.5 25.2 NAV per share cents 1 965
Slide 4: 10-year performance
10-year performance Compound growth 24% 5,000 4,500 4,000 3,500 3,000 Rm 2,500 2,000 1,500 1,000 500 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Headline earnings CAGR (1991 - 2001) = 24%
Slide 5: 10-year performance: sustained track record
10-year performance Sustained track record CAGR • Headline EPS 20% • Dividend per share 20% • Shareholders’ funds 25% • Total assets 23% • Total banking assets 20% • Loans and advances 14%
Slide 6: Income statement highlights
Income statement highlights Solid performance Standard Bank Group Dec ’01 % change Dec ’00 (Rm) (Rm) Net interest income 8 139 13 7 189 Non-interest revenue 8 879 23 7 201 Total income 17 018 18 14 390 Provision for credit losses (1 603) 14 (1 406) Operating expenses (9 744) 15 (8 462) Operating pro
Slide 7: Headline earnings per business unit
Headline earnings per business unit Domestic Banking’s contribution, 69% (65%) Liberty Stanbic Africa 7% Property 10% 3% International (12%) (8%) Operations (2%) Retail Banking 14% 34% (15%) (33%) SCMB 22% (21%) Commercial Banking 10% (9%) ( ) 31 December ‘00
Slide 8: Summarised balance sheet
Summarised balance sheet Rand effect and acquisitions Dec ’01 % change Dec ’00 (Rbn) (Rbn) Cash and short-term funds 43.4 41 30.7 Advances 157.8 24 127.1 Other assets 105.2 105 51.2 Total banking assets 306.4 47 209.0 Liberty Group 89.4 18 76.0 Total assets 395.8 39 285.0 Shareholders’ funds 26.0 42
Slide 9: Capital allocation and returns
Capital allocation and returns Improvement in Commercial and Retail Dec ’01 Dec ’00 ROE ROE Domestic operations 27.1% 27.7% Retail Banking 27.6% 27.0% SCMB 27.1% 29.1% Commercial Banking 28.5% 26.1% Property 20.7% 18.4% International Operations 10.9% 14.8% International Operations (Sterling) 12.7% 1
Slide 10: Funds margin analysis
Funds margin analysis Declining rate environment 7 • Domestic (25bp) 6 + Mix in favour of higher margin business 5 - Competitive pricing 4 - Endowment effect % 3 • International (50bp) 2 - Higher quality lower margin assets 1 - Lower rates on free funds 0 Stanbic Domestic International Stanbic Afric
Slide 11: Non-interest revenue
Non-interest revenue 52% of total revenue 100% • Fees and commissions +16% 11% 13% 90% • Repricing 80% 23% 25% 70% • Electronic Banking +36% 60% • Stanbic Africa +29% % 50% 40% • Trading income +35% 30% 66% 62% • Domestic +25% 20% 10% • International +51% 0% 2000 2001 • Other income +45% Fees and co
Slide 12: Provision for credit losses
Provision for credit losses Quality maintained • Domestic flat 0.13% • Improved credit management (0.1%) • Specific provisions (2%) 0.69% • Improved credit management • General provisions +23% - new statutory requirement • International +R168m 1.17% 1.13% • Recoveries in 2000 • Stanbic Africa +43% •
Slide 13: Non-performing loans
Non-performing loans Gross NPLs 10% lower % of average • Higher general debt provisions advances Dec Dec Dec Dec • NPL write-offs ‘01 ‘00 ‘01 ‘00 Rm Rm % % • Higher NPLs in International and Gross NPLs 4 758 5 278 3.3 4.4 Stanbic Africa Net NPLs before GDP 127 116 0.1 0.1 Net NPLs after GDP -1 364 -
Slide 14: Operating expenses
Operating expenses Expenses 15% up, currency impact 3% 10,000 • Domestic +9% 9,000 • Continued focus on 8,000 7,000 4,502 sustainable cost management 13% 3,985 6,000 • International +35% Rm 5,000 4,000 • Currency effect 3,000 17% 4,477 5,242 • Acquisitions and expansion 2,000 1,000 • Stanbic Africa
Slide 15: Cost-to-income ratio
Cost-to-income ratio Continued improvement 30 64 63 25 62 61 20 60 % 15 59 % 58 10 57 56 5 55 0 54 1997 1998 1999 2000 2001 Total income growth Cost growth Cost-to-income
Slide 16: Cost-to-income ratio: focus on efficiencies
Cost-to-income ratio Focus on efficiencies Dec ’01 Dec ’00 % % Domestic operations 56.0 58.3 Retail Banking 63.9 64.5 SCMB 50.7 55.7 Commercial Banking 39.0 45.1 Property 27.8 37.7 International Operations 63.8 62.9 Stanbic Africa 58.2 56.9 Standard Bank Group 57.3 58.8
Slide 17: Return on average equity
Return on average equity Translation gain; investment surpluses 35 45 40 30 35 25 30 20 25 Rbn % 15 20 15 10 10 5 5 0 0 1997 1998 1999 2000 2001 Shareholders' funds Headline ROE Total ROE
Slide 18: Capital adequacy
Capital adequacy Appropriately capitalised 16 • Group capital adequacy 14 12 2.9 3.2 14.4% 2.2 1.1 1.7 10 2.9 • Blended requirement of % 8 approximately 11% 6 11.1 11.2 9.7 10.5 10.1 8.9 4 • Secondary subordinated 2 debt issues 0 1996 1997 1998 1999 2000 2001 Primary capital Secondary capital Requir
Slide 19: Capital and reserves
Capital and reserves Shareholders’ funds 42% up 30 2.3 25 3.7 20 4.0 Rbn 15 28.3 26.0 10 18.3 5 0 2000 closing Translation Retained 2001 closing Revaluations 2001 adjusted balance gains earnings and balance closing other balance
Slide 20: Retail Banking
S£. _ Retail Banking
Slide 21: Retail Banking: results highlights
Retail Banking Results highlights • Headline earnings up 23% • Cost-to-income 63.9% (64.5%) • ROE 27.6% (27.0%) • Cost growth contained to 10% • Realised full year cost and service benefits • Restructured executive management team • Strategy recognising people, service and innovation • Focus on serv
Slide 22: Retail Banking: all business units contributing
Retail Banking All business units contributing • Home loans – Strong sales focus – Increased balances and improved market share – New products introduced – Process re-engineering resulted in improved turnaround times – Updated and enhanced credit scorecards
Slide 23: Retail Banking: cards and transactional banking
Retail Banking All business units contributing • Card business – Profitability doubled – Enhanced operational efficiencies – Installed SA’s first card fraud prevention neural network • Transactional Banking – More efficient pricing structure but room for improvement – Repriced services to promote di
Slide 24: Bancassurance: simple products performing well
Retail Banking Bancassurance - simple products performing well 2001 2000 Home Loan Protection - policies 29 972 19 389 - penetration 10.3% 6.9% Personal Loan Protection - policies 279 815 238 769 - penetration 24.8% 20.4% Funeral Plan - policies 332 135 195 286 - penetration* 13.1% 8.4% * E-Plan acc
Slide 25: Bancassurance: complex products, room for improvement
Retail Banking Bancassurance - complex products, room for improvement • Business volumes up 13% but below budget • 65% of new business placed with Liberty • Investment in new sales force will benefit 2002 • Management responsibility transferred to Liberty
Slide 26: Retail Banking: alliances
Retail Banking Alliances • New initiatives now managed in a separate portfolio • African Bank (Abil) alliance – Participating / learning but carefully • distribution • collection methods • account switching – Sources of revenues • loans • enhanced debit • debit orders
Slide 27: Distribution: nurturing the physical network
Retail Banking Distribution - nurturing the physical network • Dedicated service improvement programme – Executive management “adopting” branches – 39% reduction in customer complaints – Service incentive at Disney Institute • Investment in technology – Gijima - customer complaints management tool –
Slide 28: Continuous migration to direct channels
Retail Banking Continuous migration to our direct channels • ATMs – Over 265m total transactions per year – R27bn deposits and R70bn cash withdrawals in 2001 – Improved availability through Card Reader change • Customer Contact Centre – Voice and data processes have been integrated – New era CCM pro
Slide 29: Retail Banking: key focus areas for 2002
Retail Banking Key focus areas for 2002 • People – Younger talent introduced – Graduate recruitment programme to be expanded • Service – Bank wide focus on service ethic • Innovation – Product prices review to enhance profitability – Increase market share without sacrificing margin – Promote utilisa
Slide 30: SCMB
SCMB
Slide 31: SCMB: results highlights
SCMB Results highlights • Headline earnings increased 30% • Operating costs well contained • Cost-to-income ratio 50.7% (55.7%) • ROE 27.1% (29.1%) • Lower credit provisioning • A good year - positive contributions from all areas
Slide 32: SCMB: revenue by main business units
SCMB Revenue by main business units 4% 19% 4% (6%) (21%) (3%) 12% (12%) 5% (5%) 3% (3%) 33% (30%) 20% (20%) Treasury Foreign Banking Corporate and Investment Banking Asset Management Custody Project and structured finance Electronic Banking Other ( ) 31 December ‘00
Slide 33: SCMB: business unit performance
SCMB Business unit performance • Corporate Banking and Investment Banking • Project / Structured finance • Asset Management • Foreign Banking • Treasury • Electronic Banking
Slide 34: Standard Bank Business Online
Standard Bank Business Online Strengthens market leader position in online business services
Slide 35: SCMB: key focus areas for 2002
SCMB Key focus areas for 2002 • Complete global integration of selected businesses • Continue to build market position in chosen areas • Migrate Project Finance to next level by launch of specialist debt fund • Cost containment • Complete transfer of asset management business into STANLIB
Slide 36: SCMB: key focus areas for 2002
SCMB Key focus areas for 2002 • Continued focus on attraction and retention of quality staff • Maintain investment in risk management and IT infrastructure • Retain focus on cutting edge product development • Further enhance effective client service • SCMB Securities to enter growth phase
Slide 37: Commercial Banking
4k = Com ercial Banking
Slide 38: Commercial Banking: results highlights
Commercial Banking Results highlights • Headline earnings 38% up • Cost-to-income ratio 39.0% (45.1%) • ROE 28.5% (26.1%) • People changes • Enhanced customer focus after restructure • Migration of customers to BEST / CATS • Tighter credit controls
Slide 39: Stannic's new structure
Commercial Banking Stannic’s new structure MD Commercial Banking Director Retail Bank Distribution MD Stannic Director Operations Stannic Director Stannic Director Retail Stannic Corporate/Commercial and Fleet
Slide 40: Commercial Banking: key focus areas for 2002
Commercial Banking Key focus areas for 2002 • Restructure balance sheet with focus on growth in lending book, maintaining a focus on quality • Increase cross-selling • Develop product offerings and services • Enhance image, profile and culture of Commercial • Optimise cost efficiency ratios through
Slide 41: Stanbic Africa
Stanb ic Afri ca a
Slide 42: Stanbic Africa: results highlights
Stanbic Africa Results highlights • Headline earnings up 5% • Cost-to-income ratio 58.2% (56.9%) • Headline ROE 21.4% (30.4%) • Total ROE 32.9% • Diversified portfolio compensated for poor performances in Kenya, Tanzania and Zimbabwe
Slide 43: Stanbic Africa: results highlights
Stanbic Africa Results highlights • Depreciation of the Rand against most African currencies • Declining interest rate environment depressed margins • Growth in non-funds income • Operating costs continue to rise due to ongoing spend on technology
Slide 44: Other highlights from 2001
Stanbic Africa Other highlights from 2001 • Acquisition of Commercial Bank of Malawi and Uganda Commercial Bank • Establishment of an Offshore Banking operation in Mauritius • Tier II secondary capital debt issues in Botswana and Namibia
Slide 45: Stanbic Africa: Zimbabwe
Stanbic Africa Zimbabwe • Good results in local currency • Low levels of provisioning required • Cautious approach to lending • Focus on risk management • Aggressive cost management
Slide 46: Stanbic Africa: Kenya
Stanbic Africa Kenya • Management replaced • Morale has improved • Loan portfolio improved • Liability strategy - increased points of representation • Breakeven by September 2002
Slide 47: Focus on key people
Stanbic Africa Focus on key people • More high level resources • Expansion of the risk and finance functions • Managing Directors of five countries replaced in 2001
Slide 48: Stanbic Africa: key focus areas for 2002
Stanbic Africa Key focus areas for 2002 • Maximise ROE - effective capital management • Integrate new acquisitions • Recruit and develop quality people • Integration with group centres of excellence • Enhance technology • Treasury to become a larger contributor
Slide 49: International Operations
International Operations a
Slide 50: International Operations: results highlights
International Operations Results highlights • Headline earnings 14% up in Rand, 3% down in GBP • Cost-to-income ratio 63.8% (62.9%) • ROE 12.7% in Sterling • Record performances from Capital Markets and Precious Metals • Increased debt provisioning • Acquisition of Jardine Fleming Bank • Upgraded ca
Slide 51: Debt capital markets
International Operations Debt capital markets • Client based revenues markedly higher • Lower revenues from proprietary trading • Continued diversification of balance sheet • Improved risk and earnings profile
Slide 52: Resource banking
International Operations Resource banking • Precious metals strong, base metals weak • Energy business expanded • Enhanced profile and reputation in Mining Finance • Trade Finance now highly integrated with other product areas - joint effort with Stanbic Africa
Slide 53: Asset Management & Private Banking
International Operations Asset Management & Private Banking • Asset Management – Assets under management now total $500m – Products outperformed benchmarks and competitors • Private Banking – Jersey and Isle of Man performed well – Standard Jardine Fleming Bank provides foundation for expansion in A
Slide 54: International Operations: key focus areas for 2002
International Operations Key focus areas for 2002 • Grow customer-focused businesses - increased investment in distribution • Grow Private Banking and Asset Management • Fully integrate Standard Jardine Fleming Bank • Energy and power trading, financing and advisory activities • Increase scale of ac
Slide 55: Liberty Group
Linerty Group a
Slide 56: Liberty financial highlights
Liberty financial highlights Good results in a challenging environment • Headline earnings on continuing operations +14% • Embedded value per share +23% • Headline ROE on continuing operations 25% • Total ROE 40% • Return on Embedded value 26% • Life fund operating surplus +14% • Total new bancassur
Slide 57: STANLIB and Bancassurance: the way forward
STANLIB and Bancassurance The way forward • Creation of a Wealth Management Group – Powerful and comprehensive distribution – Enhanced product development – Dedicated investment marketing • Enhanced Bancassurance agreement – Access to Liberty’s sales driven culture – Lengthened contract
Slide 58: Standard Bank Group
SQ. a Standard Bank Group ——
Slide 59: Leadership changes
Leadership changes The best of the old and the best of the new • Chairman • Deputy Chairmen • Chief Executive • Deputy Chief Executive • Head SCMB • Head Retail Banking • Head Commercial Banking • Head Stanbic Africa • Head Operations • Head Retail Credit • Head HR • A third of top management replac
Slide 60: The end game?
Standard Bank Group The end game? 100% 30% 65% 100% Retail & Life Wealth Merchant Commercial Assurer Banking Banking • South Africa STANLIB SCMB International • Africa Africa
Slide 61: African roots...global reach