Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2003 Earnings Presentation
65 slides from Standard Bank's earnings presentation, 2003
Slide 1: Standard Bank Group
...blueprint fo rg@eimgenaaa Standard Bank Group
Slide 2: Interim results presentation for the six months ended 30 June 2003
Interim Interimresults results presentation presentation for the For the six six months ended months 30 June ended 2003 30 June 2003 2
Slide 3: Agenda
Agenda Financial highlights Simon Ridley Business unit overviews Retail Peter Wharton-Hood SCMB Ben Kruger Stanbic Africa Sim Tshabalala International Jacko Maree Conclusion Jacko Maree 3
Slide 4: 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 4
Slide 5: Financial highlights
Financial highlights Jun ’03 Jun ’02 % % Return on equity 22.5 18.7 Growth in headline earnings 22 19 Cost-to-income 54.9 57.5 Provision for credit losses 1.19 1.21 Growth in dividends per share 22 21 5
Slide 6: 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 7: 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 7
Slide 8: 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 8
Slide 9: 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 10: 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 11: 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 12: AC 133 overview
AC 133 overview • Classification and measurement of financial instruments • Credit provisioning • Transitional adjustments vs current period impact 12
Slide 13: 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 14: 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 15: 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 16: Non-interest revenue
Non-interest revenue 100% • Fees and commission +11% (Domestic +14%) 50% • Trading revenue +12% (Domestic +15%) • Other income +36% 0% HY 2002 HY 2003 Fees & Commission Trading Other 16
Slide 17: 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 17
Slide 18: 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 18
Slide 19: 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 20: 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 20
Slide 21: 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 22: 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 22
Slide 23: 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 23
Slide 24: Interim results Retail presentation
Interim results Retail presentation For the six Peter Wharton-Hood months ended 30 June 2003 24
Slide 25: Highlights
Highlights • Improvement in market shares • Positive endowment effect • Account growth, client retention, annuity based income and service improvement • Improved credit management 25
Slide 26: 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 26
Slide 27: Home Loans
Home Loans • Registrations up 37% to R9,8bn • Retail mortgage book up 26% to R54bn • New business market share consistently above 22% • NII gains through market share improvement exceed margin squeeze from concession levels • DreamStart focus on low-income earners • PIP portfolio down by 28% to 2 25
Slide 28: Stannic
Stannic • Loan book up 20% to R25bn • Total market share increased from 19,4% to 20,4% • Cost containment • Further integration of processes and customer service into Retail Bank 28
Slide 29: Credit card
Credit card • Market share increased from 21% to 27% • Customer base up 8% to 1,2m accounts • Focused branch support and improved service offering • Growth in debit balances of 37% • Fee income up by 25% due to customer and volume growth • Cost containment through EDS integration and reduction in op
Slide 30: Branch lending
Branch lending • Average balances +17% • Personal +21% • Agriculture +18% • Rural Commercial +17% • SME +9% • NPLs further reduced from R572m to R528m • Margin above prime improved due to adoption of customer risk-based pricing • Balance growth achieved through pre-approved campaigns and proactive p
Slide 31: Transactional banking
Transactional banking • Average current account creditors and savings balances +6% to R18bn • Average investment balances +28% to R33bn • Endowment effect boosted margin • Focus on Affinity and SME segments resulted in 5% account growth • Drive into the youth market 31
Slide 32: Mass market
Mass market • Number of active E Plan accounts +11% to 2,6m • Transaction balances +14% to R 3,3bn • Mass Market offering being expanded whilst processes are continuously being improved • Financial services education initiative • Total ABIL JV balance at R281m (Dec 2002: R256m) 32
Slide 33: Bancassurance
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 first ye
Slide 34: Going forward
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 things Simp
Slide 35: Interim results presentation SCMB
Interim results presentation SCMB For Ben the six Kruger months ended 30 June 2003 35
Slide 36: Highlights
Highlights • Favourable interest rate environment, volatile trading environment • Strong performance by all core businesses • Maintained market positioning • Improved capital utilisation • Business banking high value customers successfully incorporated 36
Slide 37: 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 37
Slide 38: Global Markets
Global Markets • Continued growth in foreign exchange revenues • More volatile trading pattern for debt capital markets • Slow down in equity markets 38
Slide 39: Commodity and Resource Banking
Commodity and Resource Banking • Increased gold price volatility • Significant growth in revenue (72%) and headline earnings contributions (80%) • Participated in a number of structured deals 39
Slide 40: Banking and Trade Finance
Banking and Trade Finance • Domestic corporate lending +13% offset by a decline in foreign lending due to strength of rand • Margins under pressure • Improved credit quality of book • Transactional banking physical volumes +5% 40
Slide 41: Banking and Trade Finance (cont.)
Banking and Trade Finance (cont.) • Business Online – revenue +17% and volumes +11% • Trade Finance, International Business Centres and International Banking impacted by currency strength • Custody – good revenue growth 41
Slide 42: Corporate Finance and Investments
Corporate Finance and Investments • Strong revenue and headline earnings growth • Good deal pipeline • Private equity portfolio performing well 42
Slide 43: Structured Debt and Property Finance
Structured Debt and Property Finance • Strong asset growth of 29% with good distribution of assets and risk • Increased revenue contribution • Project Finance business model maturing • Growth in the commercial mortgages and instalment finance businesses 43
Slide 44: Going Forward
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 International an
Slide 45: Interim results presentation Stanbic Africa
Interim results presentation Stanbic Africa For Sim the six Tshabalala months ended 30 June 2003 45
Slide 46: Highlights
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 retail, techno
Slide 47: Sequencing retail activity has been key
Sequencing retail activity has been key 2001 2002 2003 2004 2005 Laying the ground/quick Pricing, Leakage Customer Insight wins Developing capability/ cost Processes, Premises reduction Building competencies People, Service Enhance revenue Product, Payment and Sales streams Adhoc Operational Service
Slide 48: 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 48
Slide 49: 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 49
Slide 50: 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 50
Slide 51: Achieving operational efficiencies
Achieving operational efficiencies • IT project nearing completion • Customers being migrated to ATM cards • Operational processing and cash handling centres being created • Branch network rationalised and scaled • Revenue leakage being addressed 51
Slide 52: Going forward
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 52
Slide 53: Interim results International Operations presentation
Interim results International presentation Operations For theMaree Jacko six months ended 30 June 2003 53
Slide 54: Highlights
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 progressing well 54
Slide 55: 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 55
Slide 56: 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 57: 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 57
Slide 58: Going forward
Going forward • Period of consolidation • Focus on existing core products and markets • Incremental growth of Brazilian and Russian activities • Ongoing attention to cost containment 58
Slide 59: Interim results presentation Conclusion
Interim results presentation Conclusion For theMaree Jacko six months ended 30 June 2003 59
Slide 60: Senior management changes in 2003
Senior management changes in 2003 Myles Ruck CEO of Liberty, remains on Group Exco Dave Brown Resignation following restructure of Business Bank Dipak Patel MD of Stannic Victor Nosi Head of Group Corporate Affairs 60
Slide 61: Focus areas for 2H03
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 61
Slide 62: Product reporting – headline earnings
Product reporting – headline earnings % Jun ’03 Jun ’02 Summary 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 62
Slide 63: Product reporting – headline earnings
Product reporting – headline earnings % Jun ’03 Jun ’02 change Rm Rm Global retail 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) 63
Slide 64: Product reporting – headline earnings
Product reporting – headline earnings % Jun ’03 Jun ’02 change Rm Rm Global wholesale 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 64
Slide 65: Standard Bank Group
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