Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2006 Earnings Presentation
32 slides from Standard Bank's earnings presentation, June 2006
Slide 1: 2006 interim financial results presentation: Group financial highlights
2006 interim financial results presentation Group financial highlights June 2006 June 2005 Normalised Normalised Headline earnings growth (%) Ç 18 Ç 23 Headline eps (cents) 359.0 304.8 Headline eps growth (%) Ç 18 Ç 22 Fully diluted headline eps growth (%) Ç 18 Ç 21 ROE (%) 24.2 23.7 NAV per share (
Slide 2: Group income statement review
Group income statement review June 2006 % June 2005 Rm Change Rm Net interest income 7 636 23 6 192 Non-interest revenue 9 048 20 7 566 Credit impairment charges 1 300 >100 638 Operating expenses 9 039 16 7 759 Normalised headline earnings 4 869 18 4 126 Banking activities 4 539 18 3 850 Investment
Slide 3: Group dividends per share; Group return on equity
Group dividends per share 300 5.0 4.5 250 145.0 4.0 3.3 3.3 3.2 181.0 3.5 200 3.1 3.0 2.5 2.5 2.5 150 2.5 109.5 144.0 2.0 90.0 122.0 100 74.0 1.5 63.0 1.0 50 50.5 0.5 34.0 41.5 22.0 28.0 0 0.0 cents 2000 2001 2002 2003 2004 2005 HY2006 times DPS 1st half DPS 2nd half Dividend cover 5 Group return on
Slide 4: Business unit review
Business unit review Normalised Normalised Normalised headline headline ROE earnings earnings growth Rm % % Personal & Business Banking 2 086 24 28.9 Corporate & Investment Banking 2 210 17 27.9 Central and other 243 (10) 7.0 Banking activities 4 539 18 24.4 Investment Management & Life Insurance 33
Slide 5: Group loans and advances
Simon Ridley Group loans and advances June 2006 % June 2005 Rbn Change Rbn Personal & Business Banking 230 28 180 Corporate & Investment Banking 179 56 115 Central and other 6 - 6 Banking activities 416 38 302 10 5
Slide 6: Personal & Business Banking and Corporate & Investment Banking loans and advances
Personal & Business Banking loans and advances June 2006 % June 2005 Rbn Change Rbn Home loans 143 31 109 Card debtors 14 44 10 Instalment sales and finance leases 44 17 38 Other lending 32 22 26 Credit impairments (3) 27 (2) Net loans and advances 230 28 180 11 Corporate & Investment Banking loans
Slide 7: Risk-weighted assets – banking activities
Risk-weighted assets – banking activities 800 700 600 500 400 300 200 100 2000 2001 2002 2003 2004 2005 HY2006 Rbn Risk-weighted assets Total assets 13 Average risk-weighted assets June 2006 % June 2005 Rm Change Rm Personal & Business Banking 162 297 23 131 850 Corporate & Investment Banking 176 54
Slide 8: Group deposits composition; Margin analysis
Group deposits composition 100% 90% 80% 70% 72 71 74 60% 50% 40% 30% 3 4 20% 28 26 10% 22 0% HY2005 2005 HY2006 Retail priced deposits Wholesale priced retail deposits Wholesale deposits 15 Margin analysis Banking Personal & Corporate & activities Business Investment Banking Banking % % % Restated m
Slide 9: Group credit loss trends and ratios
Group credit loss trends 5 4 % of Advances 3 2 1 1.06 0.99 1.07 0.90 0.70 0.43 0.40 0 2000 2001 2002 2003 2004 2005 HY2006 Income statement charge Balance sheet provision NPLs 17 Group credit loss ratios % of advances June 2006 June 2005 NPL % PL % Total % NPL % PL % Total % Personal & Business Bank
Slide 10: Group non-interest revenue; Group operating expenses
Group non-interest revenue June 2006 % June 2005 Rm Change Rm Fee and commission revenue 5 725 16 4 936 Trading revenue 2 279 20 1 905 Other revenue 1 044 44 725 Banking and other 136 (12) 154 Realised MasterCard profit 157 - Property related revenue 386 2 379 Insurance 365 90 192 Total non-interest
Slide 11: Group cost growth drivers; Capital adequacy
Group cost growth drivers June 2006 % June 2005 Rm Change Rm Personal & Business Banking 5 773 14 5 069 Staff costs 2 801 7 2 613 Other operating costs 2 972 21 2 456 Corporate & Investment Banking 3 197 18 2 710 Staff costs 2 020 24 1 634 Other operating costs 1 177 9 1 076 Central and other 69 (20
Slide 12: Group normalised headline earnings; IFRS financial highlights
Group normalised headline earnings Weighted June 2006 % number of Rm Change shares m Normalised headline earnings 4 869 18 1 356 Black Ownership Initiative (186) (99) Shares held in policyholders’ funds (30) (45) Group headline earnings under IFRS 4 653 18 1 212 23 Group financial highlights June 20
Slide 13: Personal & Business Banking environment
Personal & Business Banking Peter Wharton-Hood Personal & Business Banking environment z Moderately rising inflation rates and firming interest rate cycles z Slowing domestic consumption z Slowdown in the South African residential property market - 13.4% ave house price growth for the six months end
Slide 14: Personal & Business Banking
Increasing indebtedness among SA households 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 % $ Household loans to total loans (LHS) Household debt to income ratio (LHS) GDP per capita, US$ (RHS) Source: SARB, Standard Bank 27 Personal & Business Ban
Slide 15: Personal & Business Banking longer-term asset growth; Retail market shares
Personal & Business Banking longer-term asset growth June 2006 % Dec 2002 Rbn Change Rbn Home loans 143 155 56 Card debtors 14 250 4 Instalment sales and finance leases 44 76 25 29 Retail market shares – South Africa Card 36% Home Loans 28% 32 Home Loans adjusted for securitisation 29% 27 Deposits 2
Slide 16: Personal & Business Banking credit provisioning
Personal & Business Banking z Margins reduced by - Increased origination costs - Increased concession costs - Increased reliance on wholesale funding z Cost increases - Rebranding (R65m) - Continued IT and infrastructure investment - Increased regulatory and compliance costs z Increased credit provi
Slide 17: Credit
Credit z Credit Risk Appetite - Better Management of risk/reward and life-time profitability trade-offs - Risk based pricing premiums - Improved risk threshold management - Rehabilitation focus in early collections - New Business - Credit lending criteria tightened for higher risk categories - Credi
Slide 18: Secured lending
Secured lending z Home loans - Sustained volume increases - Number of applications up 31% - Number of registrations up 19%, Rand value of registrations up 27% - Book increased by 31% - Credit - Average NPLs as a percentage of average advances 1.38% (2005: 1.36%) - Average LTV of new business 82% (20
Slide 19: Unsecured lending
Unsecured lending z Credit Card business strategy - 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 are high - Low cost, high volume lending solution to this segment - Costs of acquiring
Slide 20: Unsecured lending continued; Transaction and Investment Products
Unsecured lending continued z Personal and Business lending - Balance growth of 22% and 13% increase in number of accounts - Continued focus on risk based pricing has resulted in an improved yield - SME NPLs in Tanzania and Namibia z Micro-lending - ABIL JV in notice period and is in run down phase,
Slide 21: Bancassurance; Distribution
Bancassurance z Headline earnings up 107% z Life licence business - Embedded products - Continued growth in volumes - Cross sell ratios zFuneral 24.7% (Dec 05: 23.7%) zHome loan protection 18.2% (Dec 05: 18.5%) z Personal loan protection 65.3% (Dec 05: 65.3%) - Complex - 16% growth in 1st year commi
Slide 22: Operations and IT; Joint ventures and alliances
Operations and IT z Business Operations - Good progress made with integrating the bank’s operations - VAF and Card operations already into central business operations - Making progress in reducing per unit costs of processing z IT - Significant investment to - meet regulatory and compliance requirem
Slide 23: Outlook
Outlook z Industry - As forecast, environmental conditions are unlikely to be as favourable as they have been in the last two years - Expect domestic assets to grow at reduced pace - Increased interest rates likely to lead to higher bad debts and increased provisioning - Continued regulatory pressur
Slide 24: Corporate and Investment Banking
Corporate and Investment Banking z Headline earnings R2.2bn, up 17% z Total income growth R1.1bn, up 21% z Cost growth 18% z Loan growth in excess of 50% z ROE 27.9% (2005: 25.5%) z Cost-to-income ratio 52.7% (2005: 54.2%) 47 Corporate and Investment Banking z Total income growth of 21% broadly base
Slide 25: Global Markets
Global Markets z Total income growth of 25% to R2.6bn z Strong trading performance across all geographies z Base and precious metals markets trading performed particularly well z Higher volumes and volatility in the currency markets with good performance in Rest of Africa z Equity revenue declined o
Slide 26: Banking and Trade Finance; Investment Banking
Banking and Trade Finance z Income up 12% to R2.3bn, headline earnings up 6% to R742m - Growth in term and property lending - Higher volumes in transactional and custody business - Low cost growth z Impairment charges impacted headline earnings growth z Good growth in trade finance revenue with impr
Slide 27: Outlook
Outlook z Good growth opportunities in South Africa and across all other geographies z Increasing our range of investment banking activities z Focus on enhancing our distribution capabilities z Reduce capital usage through CAD2 model approval z Complete IT and support infrastructure roll outs z Cont
Slide 28: Investment Management & Life Insurance
Investment Management & Life Insurance z Liberty Life - Normalised headline earnings up 32% - Indexed new business down 2% - Normalised embedded value per share adjusted for capital reduction up 5.2% z Stanlib - Normalised headline earnings contribution up 32% - AUM up 7% z Priorities - New products
Slide 29: Financial Sector Charter in SA – progress report
Financial Sector Charter in SA – progress report z Audited achievements to Dec 05 set out in Sustainability and BEE Report z Black management comprises 39.7% of all management z Advanced R1.27bn in affordable housing loans since Jan 06 z Mzansi accounts in excess of 350 000 z BEE transaction financi
Slide 30: Business unit outlooks
Corporate & Investment Banking outlook z Encouraging loan growth z Strong revenue growth z Outside Africa – profits down as we build z Human capital index much better z Return to more normal levels of credit provisioning z David Munro appointed CEO Corporate & Investment Banking (SBSA) 59 Investment
Slide 31: Overall; Financial objectives
Overall z Assuming no major external shocks z The future still looks reasonably bright 61 Financial objectives 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-incom
Slide 32: Standard Bank
i) Standard Bank 32