Standard Bank Group Limited · JSE:SBK
Standard Bank — UBS Financial Services Conference October 2006
27 slides from Standard Bank's conference presentation, October 2006
Slide 1: UBS Financial Services Conference: The quest for positive jaws
UBS Financial Services Conference October 2006 “The quest for positive jaws”
Slide 2: The quest for positive jaws
The quest for positive jaws z Track record in achieving targeted results z Growth opportunities and strategies z Pressures on revenues and costs z Initiatives to sustain or improve efficiencies z Conclusion 2
Slide 3: Track record in achieving targeted results
Track record in achieving targeted results z Principal financial objectives - Growth (in heps) - Returns (ROE) z Secondary financial objectives - Cost-to-income ratio (jaws) - Credit loss ratio z Costs are a means to an end z May sacrifice cost-to-income ratio for longer term growth z Set targets an
Slide 4: ROE
0 5 10 15 20 25 30 % ROE 1999 2000 2001 2002 ROE 2003 Target 2004 2005 HY2006 4
Slide 5: Earnings growth
Earnings growth 800 35 700 30 600 25 500 20 400 15 300 10 200 100 5 0 0 HY2006 1999 2000 2001 2002 2003 2004 2005 % HEPS HEPS growth CPIX plus 10 target 5
Slide 6: Credit loss ratio
Credit loss ratio 1.50 1.20 0.90 0.60 0.30 0.00 HY2006 1999 2000 2001 2002 2003 2004 2005 % % Credit loss ratio Target 6
Slide 7: Credit loss ratio by segment
Credit loss ratio 20 1.40 1.10 15 0.80 10 0.50 5 0.20 -0.10 0 HY2006 2000 2001 2002 2003 2004 2005 % % Credit loss ratio Personal & Business Banking Credit loss ratio Corporate & Investment Banking Average SA prime rate Note: All of Business Banking included in Corporate & Investment Banking in 2000
Slide 8: Costs vs income
Costs vs income 30 000 64 25 000 62 20 000 60 58 15 000 56 10 000 54 5 000 52 0 50 HY2006 1999 2000 2001 2002 2003 2004 2005 Rm % Costs Revenue Cost-to-income ratio Cost-to-income ratio target 8
Slide 9: Costs vs income: cost growth, revenue growth, jaws spread
Costs vs income 30 9 25 7 20 5 15 3 10 1 5 -1 0 -3 HY2006 1999 2000 2001 2002 2003 2004 2005 % Cost growth Revenue growth Jaws spread 9
Slide 10: Growth opportunities and strategies
Growth opportunities and strategies
Slide 11: Emerging black middle class
Growth opportunities and strategies: Emerging black middle class z Coined “Black Diamonds” by UCT Unilever Institute - 2 million people - Ave personal monthly income R5 900 - 15% have a home loan - 64% have a savings/transaction account - 19% have a cheque/current account - 37% have a store card - 2
Slide 12: Credit card
Growth opportunities and strategies: Credit card z Deliberate strategy designed to capture share of wallet in LSM 4 – 8 - Represent core emerging black middle class - Propensity to take on other banking products is high z High volume lending solution to this segment z Relatively low cost to consumer
Slide 13: Rest of Africa: Product opportunities
Growth opportunities and strategies: Rest of Africa: Product opportunities z Established Personal & Business Banking branch infrastructure - Limited product range rolled out to date - High potential for further roll outs z 17 Retail Banking experts based in Johannesburg all being transferred to high
Slide 14: Rest of Africa: Nigeria
Growth opportunities and strategies: Rest of Africa: Nigeria z Nigeria is Africa’s third largest economy and most populous country with 135 million people z Following years of maladministration and stagnation, economy is growing strongly (over 6% real growth) on back of buoyant petroleum sector and
Slide 15: Rest of Africa: Nigeria cont.
Growth opportunities and strategies: Rest of Africa: Nigeria cont. z Standard Bank has entered into discussions aimed at securing a controlling interest in IBTC Chartered z In September 2006, the parties signed an Memorandum Of Understanding z Due diligence currently underway z IBTC Chartered - Univ
Slide 16: Infrastructure financing
Growth opportunities and strategies: Infrastructure financing z R370 billion public infrastructure spend planned from 2006 to 2008 z Bank lending approximately R35 billion – R40 billion z Standard Bank strongly resourced to participate in - Advisory - PPP funding (2006 – TRAC Refinancing, Gautrain)
Slide 17: Other emerging markets: Revenue generation opportunities
Growth opportunities and strategies: Other emerging markets: Revenue generation opportunities z Asia - Leadership strengthened - Team hires - increased product capability and scale - Global Markets - securitisation - Equity Derivatives - Strengthening infrastructure - new COO, Head of Risk - enhance
Slide 18: Argentina
Growth opportunities and strategies: Argentina Banking System Financial Market 72 Banks 13 State Owned 24 Foreign Stock Exchange Assets: US$77.6bn 35 Local Private Market Capitalization: US$33bn 33.1bn State Owned 3,906 Branches 19.4bn Foreign 1,564 State Owned 25.1bn Local Private Mut
Slide 19: Argentina cont.
Growth opportunities and strategies: Argentina cont. z Agreement concluded to buy 70% stake in Bank Boston z Transaction subject to regulatory approvals - Legal processes expected to be completed by year end z Bank Boston - Universal Bank - 87 Branches - Presence in 16 Provinces out of 23 - 2 795 Em
Slide 20: Pressures on revenues and costs
Pressures on revenues and costs
Slide 21: Pressures on revenues
Pressures on revenues z Personal & Business Banking fee and commission income - NCA - Enquiry into competition in banking z Corporate & Investment Banking trading income - Large base and high market shares in South Africa - Increased competition in emerging markets z Margin income - Funding pressure
Slide 22: Pressures on costs
Pressures on costs z Compliance burden - FAIS - FICA - BII - NCA z Continued infrastructure spend - IT and risk systems - Branch network 22
Slide 23: Pressures on the cost of credit
Pressures on the cost of credit z Personal & Business Banking - Strategic shift to increased card lending - Household indebtedness - Rising inflation and interest rate cycle - Collateral values in mortgages still rising z Corporate & Investment Banking - Historically credit charges have been lumpy -
Slide 24: Initiatives to sustain or improve efficiencies
Initiatives to sustain or improve efficiencies z Future operating efficiencies in Personal & Business Banking SA - Potential to reduce variable costs in line with volume and asset growth - Replacement of cumbersome product based systems with integrated core banking system z Benefits of scale in Rest
Slide 25: Initiatives to sustain or improve efficiencies cont.
Initiatives to sustain or improve efficiencies cont. z Bancassurance benefits with Liberty not yet maximised z Staff - Substantial investment in leadership excellence - 5% of head office management exited last year - Continued move to more performance based remuneration 25
Slide 26: Conclusion: Financial objectives remain achievable
Conclusion: Financial objectives remain achievable 2006 Medium term objective objective Normalised ROE 24.0% 22.5% Normalised growth in headline earnings per CPIX + 10% CPIX + 10% share Credit loss ratio 0.75% 1.00% Continuous Cost-to-income ratio 55.5% improvement CPIX is forecast to be 4.7% in 200
Slide 27: Standard Bank
W Standard Bank
Standard Bank Group — UBS Financial Services Conference October 2006 on 6ix