Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2003 Earnings Presentation
62 slides from Standard Bank's earnings presentation, September 2003
Slide 1: Standard Bank Group
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Slide 2: Interim results presentation to investors
Interim results Presentation presentation to investors September 2003 For the six Based on interim months results toended June 2003 30 June 2003 2
Slide 3: Main drivers of Group performance
Main drivers of Group performance • Domestic interest rate environment • Increased domestic retail market share • Sustained credit quality • Recovery in emerging markets • Rand strength • Equity markets • AC 133 (IAS 39) 3
Slide 4: Financial highlights
Financial highlights Jun ’03 Jun ’02 % % Return on equity 22.5 18.7 Growth in headline earnings 22.5 19.5 Cost-to-income 54.9 57.5 Provision for credit losses 1.19 1.21 Growth in dividends per share 22.1 21.4 4
Slide 5: Income statement highlights
Income statement highlights Jun ’03 % Jun ’02 Dec ’02 Rm change Rm Rm Net interest income 5 841 24 4 696 10 520 Non-interest revenue 6 085 13 5 408 11 448 Total income 11 926 18 10 104 21 968 Provision for credit losses 1 124 7 1 049 1 955 Operating expenses 6 543 13 5 813 12 587 Taxation 1 393 39 1
Slide 6: Financial performance
Financial performance 430 64 380 62 330 60 280 215 156 182 58 230 cents % 180 56 124 130 92 93 221 54 80 181 153 103 127 72 86 52 30 -20 50 1997 1998 1999 2000 2001 2002 HY 2003 Headline EPS - first half Headline EPS - second half Cost-to-income ratio 6
Slide 7: Headline return on equity
Headline return on equity 32 24 21 27 18 22 * 15 Rbn % 17 12 9 12 6 7 3 2 0 1997 1998 1999 2000 2001 2002 HY2003 Shareholders' funds Headline ROE * Reversal of translation reserve - R1.3bn 7
Slide 8: Headline earnings analysis
Headline earnings analysis Jun ’03 % Jun ’02 Dec ’02 Rm change Rm Rm Domestic Banking 2 085 27 1 638 3 960 Retail 1 087 20 905 2 110 SCMB 1 028 30 792 1 788 Central services (30) (59) 62 Stanbic Africa 249 8 231 482 International Operations 499 49 336 429 STANLIB 31 (24) 41 62 Central funding (22) (
Slide 9: Headline returns on equity
Headline returns on equity Jun ’03 Jun ’02 Dec ’02 % % % Domestic Banking 30.8 27.1 31.2 Retail 30.5 26.9 30.4 SCMB 32.0 29.5 31.2 Stanbic Africa 31.3 24.5 27.4 International Operations 16.8 9.3 6.3 Standard Bank operations 23.9 19.1 21.2 Liberty operations 8.5 15.0 12.3 Standard Bank Group 22.5 18.
Slide 10: Headline earnings mix
Headline earnings mix 17% (13% ) 37% (36% ) Retail 3% (8% ) STANLIB 8% (9% ) SCMB Stanbic Africa Liberty Group operations 34% (32% ) 1% (2% ) International Operations SCMB includes Properties and high value business banking clients 1H02 figures in brackets Retail includes small to medium client segm
Slide 11: AC 133 overview
AC 133 overview • Classification and measurement of financial instruments • Credit provisioning • Transitional adjustments vs current period impact 11
Slide 12: AC 133 – opening balance sheet adjustments to equity
AC 133 – opening balance sheet adjustments to equity Rm Financial instruments (196) Cash flow hedging reserve 28 Available-for-sale reserve 6 PV adjustment to specific provisioning (381) PV adjustment to staff home loans (164) Methodology change to general provisioning 449 Tax 86 Total adjustments (
Slide 13: AC 133 – income statement effects
AC 133 – income statement effects Jun ’03 Rm Net interest income before provision for credit losses 302 Provision for credit losses (213) Taxation & other adjustments (18) Headline earnings 71 Excl Incl Key ratios restated AC 133 AC 133 % % Headline earnings growth 20 22 Return on equity 21.9 22.5 C
Slide 14: Group funds margin analysis
Group funds margin analysis % Margin at June 2002 2.88 Domestic operations 0.17 Endowment effect 0.17 Retail deposit growth 0.16 Lending margin (0.17) Other 0.01 Stanbic Africa 0.00 International Operations 0.02 Central funding 0.16 Increased Domestic proportion of total group assets 0.23 Margin pre
Slide 15: Operating expenditure
Operating expenditure % Jun ’03 Jun ’02 Dec ’02 increase Rm Rm Rm Staff costs 15 3 724 3 237 6 934 Other operating costs 9 2 819 2 576 5 653 Total costs 13 6 543 5 813 12 587 • Overall increased headcount +2% • Investment in IT • Sales and service initiatives • African and International expansion 15
Slide 16: Cost-to-income ratios
Cost-to-income ratios Jun ’03 Jun ’02 Dec ’02 % % % Domestic Banking 53.5 55.4 53.4 Retail 59.5 61.1 59.9 SCMB 41.7 43.6 43.7 Stanbic Africa 58.8 58.9 60.8 International Operations 57.7 65.2 71.4 Standard Bank operations 54.9 57.5 57.3 16
Slide 17: Balance sheet highlights
Balance sheet highlights Jun ’03 % Jun ’02 Dec ’02 Rbn change Rbn Rbn Loans and advances 198 14 174 179 Derivative assets * 95 >100 7 9 Total banking assets 433 32 327 304 Insurance assets 86 (4) 89 86 Total assets 519 25 416 390 Shareholders’ funds 26 26 26 Deposits 257 (1) 260 240 Derivative liabi
Slide 18: Credit loss history
Credit loss history 6 5 4 % of advances 3 2 1 0 1998 1999 2000 2001 2002 HY 2003 Income statement charge Balance sheet provision NPLs 18
Slide 19: Non-performing loans
Non-performing loans Jun ’03 Dec ’02 Rm % of Rm % of adv adv Gross NPLs 4 631 2.46 4 808 2.74 1 Security and expected recoveries 2 126 2 970 Net NPLs 2 505 1 838 1 Provisions against NPLs 2 505 1 834 Net exposure - 4 NPL Coverage: Gross 2 54% 38% 2 NPL Coverage: Net 100% 99% 1 Change from Dec ’02 ma
Slide 20: Performing loans
Performing loans Jun ’03 Dec ’02 Rm Rm Gross performing loans (PLs) 197 483 177 504 Provisions against PLs (GDP) 1 1 227 1 553 1 Portfolio embedded provision ratio 0.62% 0.87% 1 Change from Dec ’02 due to accounting methodology changes 20
Slide 21: Capital adequacy
Capital adequacy Jun ’03 Dec ’02 16 400 % % % Rbn 14 350 Group 12 300 Primary 10.9 10.9 10 250 8 200 Total 14.5 14.3 6 150 4 100 SBSA 2 50 Primary 7.8 7.5 0 0 1999 2000 2001 2002 HY2003 Total 12.0 11.3 Primary capital Secondary capital Tertiary capital Risk-weighted assets 21
Slide 22: Headline earnings by product: Summary
Headline earnings by product: Summary % Jun ’03 Jun ’02 change Rm Rm Global retail 21 1 191 987 Global wholesale 33 1 666 1 255 Global fund management (40) 38 63 Life insurance (47) 100 188 Other (53) (91) Group headline earnings 22 2 942 2 402 22
Slide 23: Headline earnings by product: Retail
Headline earnings by product: Retail % Jun ’03 Jun ’02 change Rm Rm 21 1 191 987 Instalment finance 18 127 108 Mortgage lending 14 200 176 Card products 95 78 40 Retail transactional products 20 717 597 Bancassurance 17 82 70 Other (13) (4) 23
Slide 24: Headline earnings by product: Wholesale
Headline earnings by product: Wholesale % Jun ’03 Jun ’02 change Rm Rm 33 1 666 1 255 Commodities & resource banking (13) 124 143 Global markets 33 793 597 Banking & trade finance 33 412 310 Corporate finance & investments 24 51 41 Structured debt & property finance 74 286 164 24
Slide 25: Interim results Retail presentation
Interim results Retail presentation For the six months ended 30 June 2003 25
Slide 26: Retail highlights
Retail highlights • Improvement in market shares • Positive endowment effect • Account growth, client retention, annuity based income and service improvement • Improved credit management 26
Slide 27: Retail Bank revenue by product
Retail Bank revenue by product 4 000 Ç 18% 3 500 3 000 Rm 2 500 2 000 1 500 Ç 27% 1 000 Ç 21% Ç 14% 500 Ç 18% 0 Instalment finance Mortgage lending Card products Retail transactional Bancassurance products HY 2002 HY 2003 27
Slide 28: Retail: Home loans and Card
Retail Home Loans • Ave retail mortgage book up 26% to R54bn • New business market share consistently above 22% • Repossessed portfolio down by 28% to 2 258 properties Card • Market share increased from 21% to 27% • Reduction in operational risk losses • Marginal increase in NPLs 28
Slide 29: Retail: Stannic and Branch lending
Retail Stannic (instalment finance) • Loan book up 20% to R25bn • Total market share increased from 19,4% to 20,4% Branch lending • Average balances +17% • Personal +21% • SME +9% 29
Slide 30: Retail: Transactional banking and Mass market
Retail Transactional banking • Average current account creditors and savings balances +6% to R18bn • Average investment balances +28% to R33bn • Endowment effect boosted margin Mass market • Number of active E Plan accounts +11% to 2,6m • Financial services education initiative • Total ABIL (microle
Slide 31: Retail: Bancassurance
Retail Bancassurance Embedded # of Policies Penetration Funeral 37% Ï 17,9% (Jun 02: 14,6%) Home loan 33% Ï 13,5% (Jun 02: 11,6%) Personal loan 17% Ï 30,7% (Jun 02: 26,9%) Complex • Co-operation with Liberty working well • Performance affected by poor investment market conditions • 6% reduction in f
Slide 32: Retail going forward
Retail going forward • Further refinements of segment strategy • Sales and customer driven marketing initiatives • Improved IT usage for cost efficient processes • Continued credit process improvements • Improved branch service and support processes • Customer focused product distribution Doing thin
Slide 33: Interim results presentation SCMB
Interim results presentation SCMB For the six months ended 30 June 2003 33
Slide 34: SCMB highlights
SCMB highlights • Favourable interest rate environment, volatile trading environment • Strong performance by all core businesses • Maintained market positioning • Improved capital utilisation • High value customers from business banking division successfully incorporated 34
Slide 35: SCMB revenue by product
SCMB revenue by product 1200 Ç 20% 1000 Rm 800 Ç 18% 600 400 Ç 44% 200 Ç 72% Ç 33% 0 Global Markets Commodities & Banking & Trade Structured Debt & Corporate Finance Resource Banking Finance Prop Finance & Investments HY 2002 HY 2003 35
Slide 36: SCMB: Global markets and commodity banking
SCMB Global markets • Continued growth in foreign exchange revenues • More volatile trading pattern for debt capital markets • Slow down in equity derivatives trading Commodity and resource banking • Increased gold price volatility • Significant growth in revenue (72%) and headline earnings contribu
Slide 37: SCMB: Banking and trade finance
SCMB Banking and trade finance • Domestic corporate lending +13% offset by a decline in foreign lending due to strength of rand • Margins under pressure for good credit • Improved credit quality • Transactional banking physical volumes +5% • Business Online – revenue +17% and volumes +11% • Custody
Slide 38: SCMB: Corporate finance and structured debt
SCMB Corporate finance and investments • Strong revenue and headline earnings growth • Good deal pipeline • Private equity portfolio performing well Structured debt and property finance • Strong asset growth of 29% with good distribution of assets and risk • Increased revenue contribution • Project
Slide 39: SCMB going forward
SCMB going forward • Growth across diversified portfolio of businesses • Reduce trading income volatility • Cost containment • CRM • Capitalise on empowerment opportunities • Continued investment in IT infrastructure and risk management in support of all business areas and alignment with Internation
Slide 40: Interim results presentation Stanbic Africa
Interim results presentation Stanbic Africa For the six months ended 30 June 2003 40
Slide 41: Stanbic Africa highlights
Stanbic Africa highlights • Most businesses performing well in local currencies • Strength of rand dampened performance • Zimbabwe • excluded from profit • NAV zero • Quality of the book has improved • Good progress made in recoveries • Non-interest revenue growing • Cost growth due to investment in
Slide 42: Overview of current network and retail account base
Overview of current network and retail account base Country Emphasis on Retail market Number of Number of retail share branches ATMS Lesotho ◕ 60% 23 23 Malawi ◕ 40% 20 9 Swaziland ◕ 45% 14 18 Namibia ◕ 37% 22 72 Uganda ◕ 35% 65 12 Zimbabwe ◑ 5% 14 21 Botswana ◔ 2% 6 8 Zambia ◔ 2% 7 6 Ghana ◔ 1% 3 0
Slide 43: Corporate banking integration
Corporate banking integration • SCMB, International and Stanbic Africa working together • Trade finance business development • Increased customer interface and service • Enhanced electronic banking, treasury, custody and leasing systems 43
Slide 44: Acquisition successes
Acquisition successes • Integration of Uganda Commercial Bank progressing well • Strong profit growth due to new lending opportunities • Commercial Bank of Malawi re-branded to Stanbic Bank • Rollout of technology by year end 44
Slide 45: Risk management
Risk management • Risk management structure established covering all disciplines including market risk • Credit process enhanced • Clean up book • Collections improved • Revised policies • Retail focus 45
Slide 46: Stanbic Africa going forward
Stanbic Africa going forward • Improve returns in local currency • Continued focus on retail product delivery and customer interfaces • Drive increased transactional volumes - “sweat the network” • Acquisitions, products and points of representation 46
Slide 47: Interim results International Operations presentation
Interim results International presentation Operations For the six months ended 30 June 2003 47
Slide 48: International Operations' highlights
International Operations’ highlights • Market environment more favourable • Strengthening of emerging market asset prices • Tightening of credit spreads • Strong performances by all primary business units • On-time establishment of investment banks in Russia and Brazil • Alignment with SCMB progress
Slide 49: International Operations' revenue by product
International Operations’ revenue by product 100 Ç 87% 90 80 £m 70 60 50 40 Ç 14% 30 Ç 4% 20 È 22 % 10 Ç 7% 0 Global Markets Commodities and Banking and Trade Global fund Other Resource Banking Finance management HY 2002 HY 2003 49
Slide 50: Leaders in the Brazilian Debt Market
Leaders in the Brazilian Debt Market US$ 180,000,000.00 US$100,000.00 US$150,000,000.00 US$ 250,000,000.00 Senior Unsecured 6% Medium Term Notes 5.0% Notes 5% Notes Fixed Notes – 1 year Due June 2005 Due November 2004 Due July 2004 May May April June Lead Manager Joint Lead Managers Joint Lead Manag
Slide 51: Emerging markets: why we can compete
Emerging markets: why we can compete • On the ground presence • Niche player • Strong client focus • Originate deals at source • Commitment to and focus on emerging markets • Responsive and innovative solutions • Distributive philosophy • Best practice risk management 51
Slide 52: International Operations going forward
International Operations going forward • Period of consolidation • Focus on existing core products and markets • Incremental growth of Brazilian and Russian activities • Ongoing attention to cost containment 52
Slide 53: Interim results presentation Conclusion
Interim results presentation Conclusion For the six months ended 30 June 2003 53
Slide 54: Group focus areas for 2H03
Group focus areas for 2H03 • Financial Services Charter • Managing in a lower interest rate, low inflation rate environment • Appropriate alignment of SCMB, International Operations, Stanbic Africa and Retail • Product reporting – focus on products and customers 54
Slide 55: Interim results presentation Appendices
Interim results presentation Appendices For the six months ended 30 June 2003 55
Slide 56: Awards received
Awards received • Euromoney - South Africa’s best bank • Global Finance - best bank in South Africa and Africa • PricewaterhouseCoopers - respected jointly first by its pears • Investment Analysts Society of Southern Africa - Best Communication and Reporting Awards overall winner • Investor Relation
Slide 57: The Financial Sector Charter
The Financial Sector Charter • Human resource development • Procurement • Enterprise development • Access • Empowerment financing • Housing • Infrastructure • Agriculture • SME’s • BEE transactions • Corporate social investment • Ownership and control 57
Slide 58: Department of Trade and Industry BEE scorecard guide
Department of Trade and Industry BEE scorecard guide • Direct empowerment score • Equity ownership (20%) • Management (10%) • Human resource development & employment equity • Employment equity (10%) • Skills development (20%) • Indirect empowerment score • Preferential procurement (20%) • Enterprise
Slide 59: Standard Bank Group transformation
Standard Bank Group transformation AIC 2002 2001 % % Managerial staff ABSA 10 7 FirstRand 24 18 Nedcor 20 21 Standard Bank 28 23 Total staff ABSA 35 33 FirstRand 50 50 Nedcor 49 50 Standard Bank 64 55 Source: annual reports 59
Slide 60: South African macro environment economic outlook
South African macro environment economic outlook • Macroeconomic stability achieved & rewarded with credit upgrades by Moody’s (Baa2) and Standard & Poor’s (BBB) during May 2003. • South Africa increasingly stands out among emerging markets • Rand correction & monetary policy have helped lower infla
Slide 61: The South African macro environment: interest rates and inflation
The South African macro environment Interest rates and inflation Forecast 30 • Substantial scope for lower 25 interest rates (cumulative cuts of 250 basis points) in 20 short- to medium-term % 15 • 2003 CPIX inflation target remains out of reach 10 (forecast of 6.7%); but CPIX 5 expected to fall bel
Slide 62: Standard Bank Group
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