Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2005 Earnings Presentation
59 slides from Standard Bank's earnings presentation, 2005
Slide 1: 2005 annual financial results presentation
2005 annual financial results presentation
Slide 2: Agenda
Agenda z Financial highlights Simon Ridley z Business unit overviews - Personal & Business Banking Peter Wharton-Hood - Corporate & Investment Banking Ben Kruger z Conclusion Jacko Maree 2
Slide 3: Group financial highlights
Group financial highlights 2005 2005 2004 Objective Normalised Normalised Headline earnings growth (%) Ç 20.0% Ç 19.6% Headline eps (cents) 666.0 558.1 Headline eps growth (%) 13.9 Ç 19.3% Ç 18.5% ROE (%) 22.5 25.2 24.2 NAV per share (cents) 2 830 2 464 Dividend cover (times) 2.5 2.5 Credit loss rat
Slide 4: Group normalised headline earnings
Group normalised headline earnings Weighted 2005 % number of Rm Change shares m Normalised headline earnings 9 013 20 1 353 Black Ownership Initiative 99 Dividend receivable on 8,5% pref shares 367 Dividend accrual on perpetual pref shares 3 Shares held in policyholders’ funds 49 Fair value movement
Slide 5: Group financial highlights – IFRS
Group financial highlights – IFRS 2005 Reported 2004 Reported under IFRS under IFRS Headline earnings growth (%) Ç 12.3% Ç 20.0% Headline eps (cents) 702.3 570.3 Headline eps growth (%) Ç 23.1% Ç 21.1% ROE (%) 27.8 26.0 NAV per share (cents) 2 729 2 320 5
Slide 6: Group income statement review
Group income statement review 2005 Rm % Change 2004 Rm Net interest income 12 987 13 11 492 Non-interest revenue 16 718 11 15 044 Credit impairment charges 1 207 15 1 050 Operating expenses 16 817 9 15 384 Normalised headline earnings 9 013 20 7 511 Standard Bank operations 8 490 19 7 156 Liberty Li
Slide 7: Group headline earnings per share
Group headline earnings per share Ç19% 700 600 Ç19% Ç19% 500 Ç18% 400 Ç18% Ç25% 300 Ç27% 200 100 0 cents 1999 2000 2001 2002 2003 2004N 2005N Headline EPS 1st half Headline EPS 2nd half N - normalised 7
Slide 8: Group dividends per share
Group dividends per share 300.0 5.0 4.5 250.0 145.0 4.0 3.3 3.3 3.3 3.2 181.0 3.5 200.0 3.1 3.0 2.5 2.5 150.0 2.5 109.5 2.0 90.0 122.0 100.0 74.0 1.5 63.0 50.0 1.0 50.0 50.5 0.5 34.0 41.5 18.0 22.0 28.0 0.0 0.0 cents 1999 2000 2001 2002 2003 2004 2005 times DPS 1st half DPS 2nd half Dividend cover 8
Slide 9: Group return on equity
Group return on equity 3 000 25.2 24.2 22.9 25.0 22.4 20.9 20.3 2 500 20.1 20.0 21.1 2 000 19.8 17.8 17.0 15.0 1 500 14.8 13.4 12.0 10.0 1 000 1 139 1 397 1 939 1 957 2 154 2 464 2 830 5.0 500 Ç1% Ç23% Ç39% Ç1% Ç10% Ç14% Ç15% 0 0.0 Rm 1999 2000 2001 2002 2003 2004N 2005N % NAV per share ROE Ave cost
Slide 10: Segmental reporting: the way forward
Segmental reporting: the way forward Personal & Business Banking SA Personal & Business Banking Rest of Africa Corporate & Investment Corporate & Investment Banking SA Banking Corporate & Investment Banking International Stanlib Investment Management & Life Insurance Liberty Life 10
Slide 11: Business unit review
Business unit review Normalised Normalised Normalised headline headline ROE earnings earnings growth Rm % % Personal & Business Banking 4 013 22 30.9 Corporate & Investment Banking 4 050 7 27.0 Central and other 330 > 100 n.a. Banking Activities 8 393 18 25.6 Investment Management & Life Insurance 6
Slide 12: Normalised headline earnings mix by major business unit
Normalised headline earnings mix by major business unit Personal & Business Banking 7 (2004: 44%) 4 Corporate & Investment Banking (2004: 50%) 44 Central and other (2004: 1%) 45 Investment Management & Life Insurance (2004: 5%) 12
Slide 13: Business segment review (existing geographic segmentation)
Business segment review (existing geographic segmentation) Normalised Normalised Normalised headline headline ROE earnings earnings growth Rm % % Domestic Banking 6 991 21 33.6 Personal & Business Banking SA 3 664 23 31.2 Corporate & Investment Banking SA 3 213 15 40.6 Rest of Africa 721 17 27.4 Cor
Slide 14: Group loans and advances
Group loans and advances Dec 2005 % Dec 2004 Rbn Change Rbn Domestic Banking 271 27 213 Personal & Business Banking SA 194 28 151 Corporate & Investment Banking SA 77 24 62 Rest of Africa 14 18 12 Corporate & Investment Banking International 49 44 34 Standard Bank Group 334 29 259 14
Slide 15: Personal & Business Banking SA loans and advances
Personal & Business Banking SA loans and advances Dec 2005 % Dec 2004 Rbn Change Rbn Home loans 121 32 92 Card debtors 12 55 8 Vehicle and asset finance 39 16 33 Other lending 24 20 20 Provisions (2) - (2) Net loans and advances 194 28 151 15
Slide 16: Domestic margin analysis
Domestic margin analysis % Restated margin year ended Dec 2004 3.40 Lending (0.01) Funding (0.25) Endowment effect – equity (0.04) Other activities 0.07 Change in composition of balance sheet (0.01) Margin year ended Dec 2005 3.16 16
Slide 17: Group credit loss trends
Group credit loss trends 5.00 4.00 % of Advances 3.00 2.00 1.00 1.28 1.07 1.00 1.08 0.91 0.43 0.41 0.00 1999 2000 2001 2002 2003 2004 2005 Income statement charge Balance sheet provision NPLs 17
Slide 18: Group credit provisioning
Group credit provisioning Percentage of advances Dec 2005 2005 Dec 2004 2004 NPL Charge NPL Charge Domestic Banking 1.2 0.50 1.5 0.41 Personal & Business Banking SA 1.5 0.73 1.7 0.59 Corporate & Investment Banking SA 0.5 (0.00) 1.0 0.05 Rest of Africa 2.2 0.28 1.7 0.38 International 0.8 (0.22) 1.3 0
Slide 19: Group non-interest revenue
Group non-interest revenue 18 000 70 16 000 65 14 000 57 60 56 12 000 53 53 55 51 52 10 000 49 50 8 000 45 6 000 40 4 000 2 000 35 0 30 Rm 1999 2000 2001 2002 2003 2004 2005 % Fees & commission Other NIR NIR as a % of total income 19
Slide 20: Group operating expenses
Group operating expenses 30 64 61.8 25 62 20 60 58.8 58.0 15 57.4 57.3 58 56.6 56.2 10 56 5 54 0 52 % 1999 2000 2001 2002 2003 2004 2005 % growth ratio Income growth Cost growth Cost-to-income ratio 20
Slide 21: Group cost vs revenue growth
Group cost vs revenue growth Revenue Cost Cost-to- growth growth income ratio % % % Domestic Banking 15 9 52.9 Personal & Business Banking SA 20 13 59.2 Corporate & Investment Banking SA 4 3 41.1 Rest of Africa 11 15 62.7 Corporate & Investment Banking International (5) 9 80.7 International USD (4)
Slide 22: Risk-weighted assets
Risk-weighted assets ↑ 20% 4 784 300 000 ↑ 12% 5 238 40 644 250 000 41 340 200 000 Other 150 000 Trading book 251 442 100 000 201 689 Banking book 50 000 0 Rm 2004 2005 22
Slide 23: Capital adequacy of banking operations
Capital adequacy of banking operations Dec 2005 Dec 2004 % % Group Tier I 10.5 11.0 Tiers II & III 3.7 4.0 Total 14.2 15.0 SBSA Tier I 8.6 9.1 Tiers II & III 3.9 4.3 Total 12.5 13.4 23
Slide 24: Personal & Business Banking
Personal & Business Banking Peter Wharton-Hood
Slide 25: Personal & Business Banking
Personal & Business Banking z Group reporting - Headline earnings up 22% - ROE 30.9% (2004: 34.2%) - Cost-to-income ratio 60.0% (2004: 62.8%) 25
Slide 26: Personal & Business Banking environment
Personal & Business Banking environment z South Africa - Excellent conditions for retail banking - Consumer fundamentals remain healthy - Resilient real income growth - 19.6% increase in Private Sector Credit Extension in 2005 underpinned by structurally lower interest rates z Rest of Africa - Susta
Slide 27: Highlights
Highlights z South Africa - Service levels maintained despite increased volumes and new legislation - Improved customer segmentation - 28% advances growth - Sensible rationalisation of the network staffing levels z Rest of Africa - Good progress made on systems upgrades and standardisation - Fee and
Slide 28: Retail market shares – South Africa
Retail market shares – South Africa Card 35% Home Loans 27% 32 Home Loans adjusted for securitisation 28% 27 Other lending 28% Deposits 27% 22 Total vehicle and asset finance 20% Total vehicle and asset 17 finance adjusted for 2001 2002 2003 2004 2005 securitisation 21% % 28
Slide 29: Early arrears as a % of book
% of Advances 0 1 2 3 4 January '03 March '03 May '03 July '03 September'03 November '03 Early arrears as a % of book January '04 Card Personal & Business Banking SA March '04 May '04 July '04 September'04 Home Loans November '04 VAF January'05 March '05 May '05 July '05 September'05 November'05 29
Slide 30: Home loans – South Africa
Home loans – South Africa z Sustained strong volume increases, optimal market share levels out - Number of applications up 35% - Number of registrations up 11% - Rand value of registrations up 25% - 32% increase in the book z Credit - Improved NPLs as a % of total advances 1.21% (2004: 1.51%) - Numb
Slide 31: Vehicle & Asset Finance – South Africa
Vehicle & Asset Finance – South Africa z Mixed fortunes - Motor book grew by 29% against growth of 26% in motor industry sales - Non-motor market share dropped from 36% to 33% - Dominate Industrial with 44% share, Sea and Water at 29% whilst “other” dropped from 11% to 8% z Sales focus - Grown sales
Slide 32: Card – South Africa
Card – South Africa z Performance in line with strategy adopted in 2002 z Profit strategy allowing for increasing bad debts - Cards in issue 1.9m up 44% for the year - Ave debit balance R8.8bn up 52% for the year - Cardholder spend up 30% for the year - Headline earnings up 46% after a 54% increase
Slide 33: Volume growth – South Africa
Volume growth – South Africa z Good volume growth in transaction accounts - 15% growth in number of current accounts - 5% growth in number of active E-Plan accounts, 24% growth in balances - 33% growth in number of Maestro accounts, usage up 48% - 55% growth in number of cheque cards, usage up 69% z
Slide 34: Personal & Business Banking in the Rest of Africa
Personal & Business Banking in the Rest of Africa z Headline earnings up 19% z Completed country specific high level strategic approaches z Simple customer segmentation in initial implementation z 3 successful sales campaigns yielded significant sales lift z Delivered successful product initiatives
Slide 35: Looking forward
Looking forward z Rest of Africa - Concentrate on the basics of service and sales - Continued investment in infrastructure required z South Africa - Emphasis on service, sales and customer acquisition proving profitable - JV opportunities starting to show upside - Credit policies remain appropriate
Slide 36: Corporate & Investment Banking
Corporate & Investment Banking Ben Kruger
Slide 37: Corporate & Investment Banking
Corporate & Investment Banking z Group reporting - Headline earnings up 7% - ROE 27.0% (2004: 27.2%) - Cost-to-income ratio 54.0% (2004: 51.5%) z A year of integration, reflection and restructuring z Client transactions and teams of people less constrained by geographical boundaries z Announced amen
Slide 38: Corporate & Investment Banking - SA
Corporate & Investment Banking - SA z Better than expected results off a high base z Good growth in the lending books towards year end z Challenges in funding group asset growth, compressing margins z Well provisioned credit position z Good results from - Structured Debt, Project and Acquisition Fin
Slide 39: Corporate & Investment Banking - SA
Corporate & Investment Banking - SA z Good volume growth in foreign exchange trading at compressed spreads z Good control of operating expenditure z Increased headcount on systems and infrastructure projects z Strong deal pipeline 39
Slide 40: Corporate & Investment Banking - Rest of Africa
Corporate & Investment Banking - Rest of Africa z Good growth in loans and advances z Strong revenue growth in foreign exchange income with increased volumes traded and elements of currency volatility in some countries z Cost growth due to investment in IT systems and processes as well as continuous
Slide 41: Corporate & Investment Banking - International
Corporate & Investment Banking - International z Disappointing results, but no major mistakes - Revenue down 4% (USD) - Costs up 11% (USD) z Lower revenue generated across all trading areas against trending and buoyant emerging and commodity markets z Continued the shift from proprietary to client t
Slide 42: Corporate & Investment Banking - International
Corporate & Investment Banking - International z Good growth in Banking and Trade Finance business z Provision releases on rehabilitated accounts z Good gains realised on Private Equity investments as well as mark to market on portfolio of commodity investments z Increased tax charge due to adverse
Slide 43: Emerging markets competitive environment
Emerging markets competitive environment Stylised growth-cycle of wholesale banking markets Letter of credit Struct. trade finance Syndicated lending Bonds Equity Competition from commercial banks Competition from global investment banks & hedge funds z Emerging markets now largely investment grade,
Slide 44: GEM Corporate & Investment Banking
GEM Corporate & Investment Banking Scale of Emerging Markets by Country and Product vs SA 10 8 6 4 2 0 Korea China Ru Mex Braz Tur HK India Hu S’pore Malay Chile Phil SA Total financing Loan syndication Bonds Equity 44
Slide 45: GEM Corporate & Investment Banking
GEM Corporate & Investment Banking Are we in the right markets? Are we up-to-scale? 12% Hu 10% Total financing (%GDP) HK 8% Ch Phi Mal 6% S'pore Tu 4% Ru Is Kor Cz Thai SA Br Mx 2% Mor Peru Pol Ind Egypt Indon Ch Arg 0% 0 5,000 10,000 15,000 20,000 25,000 30,000 Total financing (US$m) 45
Slide 46: Actions for sustainable growth
Actions for sustainable growth z We are in the right markets, but significantly below scale z Grow the regions with people on the ground as opposed to the centre z Reduce the number of counterparties and countries covered z Complete migration from transaction focus to customer focus z Increase scope
Slide 47: Looking Forward
Looking Forward z South Africa - Business well positioned for growth on the back of black economic empowerment and infrastructure related projects with a good pipeline of deals - Staff highly motivated to continue strong performance of recent years z Rest of Africa - Restructured and better position
Slide 48: Conclusion
Conclusion Jacko Maree Standard Bank
Slide 49: Looking back to 2000
Looking back to 2000 z Underperforming Retail business in SA z Multiple silos to be integrated z Fledgling operations outside South Africa z Large opportunities for process improvements z Recently acquired control of Liberty z Question mark around risk management z Talent deficit z Skills deficit z
Slide 50: Currently
Currently z Most South African businesses firing on all cylinders z Appropriate levels of integration/co-operation between businesses z Understand the challenges of operating internationally z Much better at processing z Actively involved in Liberty and Stanlib strategy z Top class risk management z
Slide 51: Vision
Vision We are committed to making a real difference to financial services in South Africa and other emerging markets z Headquartered in the Johannesburg CBD z Listed on JSE 51
Slide 52: Standard Bank in South Africa
Standard Bank in South Africa z The home base is strong and growing z We are well positioned in South Africa across virtually all our businesses z The black middle class is growing z Infrastructure spending (and financing) is key to the country’s future z Liberty can become more efficient and then f
Slide 53: South African growth expectations
But ultimately, given our size z Our South African growth should revert to - CPIX + GDP growth not - CPIX + 10% z There are limited acquisition opportunities in South Africa 53
Slide 54: Beyond our borders
Beyond our borders z We have international experience - Positive and negative z We understand emerging markets z We have exportable skills z We have simplified our structures - Personal & Business Banking and Corporate & Investment Banking z We are committed long term players z We can be bolder 54
Slide 55: Beyond our borders – acquisitions
Beyond our borders – acquisitions z Not limited to Africa z Only emerging markets z Opportunistic z Good businesses rather than broken banks z Approximately 5 transactions by 2010, generating significant profits 55
Slide 56: Beyond our borders – current priorities
Beyond our borders – current priorities z Argentina - Very good bank, challenging but fast growing economy - Relatively small capital commitment - Far advanced z Nigeria - Various opportunities - $185m commitment made - Early stages 56
Slide 57: Delivering to our shareholders
Delivering to our shareholders z We understand that we earn the right to exist by providing appropriate long-term returns to our shareholders z Balancing - ROE (short term) - Growth (long term) 57
Slide 58: Financial objectives
Financial objectives 2006 Medium term objective objective Normalised ROE 24.0% 22.5% Normalised growth in headline earnings per share CPIX + 10% CPIX + 10% Credit loss ratio 0.75% 1.00% Continuous Cost-to-income ratio 55.5% improvement CPIX is forecast to be 4.3% in 2006 58
Slide 59: Standard Bank
Standard Bank