Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2007 Earnings Presentation
32 slides from Standard Bank's earnings presentation, June 2007
Slide 1: 2007 interim financial results presentation
2007 interim financial results presentation Financial highlights June 2007 % change June 2006 HEPS (cents) 451.1 26 359.0 Diluted HEPS (cents) 444.5 26 353.0 DPS (cents) 181.0 26 144.0 Distribution from share premium 100.0 - Distribution from retained earnings 81.0 144.0 NAV (cents) 3 904 22 3 201 R
Slide 2: Group income statement highlights
Group income statement highlights June 2007 % June 2006 Rm change Rm Net interest income 10 366 36 7 636 Non-interest revenue 11 543 31 8 844 Total income 21 909 33 16 480 Credit impairment charges 2 109 62 1 300 Operating expenses 11 464 30 8 835 Taxation 2 562 57 1 627 Normalised headline earnings
Slide 3: Group distributions per share; Business unit review
Group distributions per share 350 4.0 300 176 3.5 250 145 3.0 181 200 2.5 181 150 109 144 2.0 100 90 122 74 1.5 50 42 51 28 34 0 1.0 cents 2001 2002 2003 2004 2005 2006 HY2007 times Distribution per share 1st half Distribution per share 2nd half Dividend cover 5 Business unit review June 2007 Headli
Slide 4: Headline earnings contribution by business unit
Headline earnings contribution by business unit Personal & Business Banking 8 (2) (June 2006: 42%) Corporate & Investment Banking 43 (June 2006: 47%) Central and other (June 2006: 4%) 51 Investment Management & Life Insurance (Liberty Life) (June 2006: 7%) 7 NII on interest earning assets 11 000 0.2
Slide 5: Non-interest revenue; Net advances growth
Non-interest revenue June 2007 % June 2006 Rm change Rm Net fee and commission revenue 6 882 25 5 521 Trading revenue 3 689 62 2 279 Other revenue 972 (7) 1 044 Banking and other 258 90 136 Realised MasterCard profit - 157 Property related revenue 277 (28) 386 Insurance related revenue 437 20 365 To
Slide 6: Credit impairment charges
Credit impairment charges June 2007 NPL charge PL charge Total charge Credit loss Rm Rm Rm ratio % (post IFRS 7) Personal & Business Banking 1 567 346 1 913 1.32 Corporate & Investment Banking 72 124 196 0.16 Banking activities 1 639 470 2 109 0.78 June 2006 NPL charge PL charge Total charge Credit
Slide 7: Operating expenses; Cost-to-income ratio
Operating expenses June 2007 % z Excluding Argentina, costs up 25% Rm change - Inclusion of normal running costs Staff 6 874 36 - Once off acquisition and Personal & Business Banking 3 454 27 rebranding costs Corporate & Investment Banking 3 089 48 z Staff costs Central and other 331 29 - 14% increa
Slide 8: Capital management
Capital management Prudent capital levels supporting risk appetite z Current adequacy under Basel I - Total adequacy 13.7% (2006: 14.7%) - Tier 1 adequacy 10.3% (2006: 10.6%) z Economic capital utilisation - Economic capital utilised at 30 June 2007 R35.5bn - compared to banking Tier I capital avail
Slide 9: Capital management: currency and growth
Capital management In the appropriate currency June 2007 Total Rand Dollar Sterling Euro Other Rbn Rbn Rbn Rbn Rbn Rbn Actual NAV 54 34 9 3 2 6 Currency profile changes (4) 2 3 (1) due to hedging strategies Hedged NAV 54 34 5 5 5 5 z Hedging aimed at diversification away from US$ concentration z Oth
Slide 10: Capital management: earning optimal returns
Capital management Earning optimal returns 4 500 30 4 000 25.4 25.4 24.2 24.4 22.9 25 3 500 20.1 20.3 3 000 20 2 500 17.8 17.0 15 2 000 14.8 13.4 13.4 1 500 12.0 12.6 10 1 000 5 500 1 939 1 957 2 150 2 453 2 809 3 548 3 904 0 0 cents 2001 2002 2003 2004 2005 2006 HY2007 % NAV per share ROE Ave cost
Slide 11: Personal & Business Banking
Personal & Business Banking z Headline earnings up 27% to R2 626m z Credit loss ratio 1.32% (June 2006: 0.99%) z ROE 28.8% (June 2006: 29.1%) z Total income growth 29% (June 2006: 20%) z Total loan growth 35% (June 2006: 28%) z Cost-to-income ratio 52.5% (2006: 56.2%) % of group assets % of group he
Slide 12: Overview of Personal & Business Banking results
Overview of Personal & Business Banking results z Economic fundamentals have been favourable for retail banking z Solid results in an increasingly competitive environment z Successful service, sales and customer acquisition strategies of the past 36 months have yielded strong profits and planned ret
Slide 13: Headline earnings contribution per product
Headline earnings contribution per product June 2007 % June 2006 Rm growth Rm Transaction products 1 702 26 1 356 Home loans 444 14 388 Bancassurance 316 67 189 Card 113 22 93 Vehicle and asset finance 51 46 35 Personal & Business Banking 2 626 27 2 061 25 Gross advances growth June 2007 % June 2006
Slide 14: Credit impairments
Credit impairments Credit loss ratio June 2007 % * June 2006 % * Home loans 0.61 0.33 Vehicle and asset finance 1.51 1.03 Card 6.55 6.50 Other 1.83 1.34 Personal & Business Banking 1.32 0.99 * Includes impairments against both performing and non-performing loans 27 Early arrears in SBSA (special men
Slide 15: Credit
Credit z Home loans - Marked increase in special mention and sub-standard categories has exaggerated provisioning, attributed to - Increased number of short payers following interest rate increases (R1.7bn) - Rise in unprocessed cancelled mortgage bonds caused by Deeds Office strike (R1.1bn) - Appli
Slide 16: Secured lending: Home Loans and VAF
Secured lending: Home Loans z Volume growth still strong - Number of registrations up 10% - Value of registrations up 24% - Book increase of 36% z Margin compression continues - Increasing wholesale funding dependency - Competitive pressures driving concessions - Increasing amortisation of originati
Slide 17: Unsecured lending: Card
Unsecured lending: Card z Maturation after 3 years of strong growth - Number of accounts up 7% to 2.4 million - Cardholders spend up 12% - Book increased 45% z Rate ceiling defined by the Usury Act only increased in line with prime in March 2007 z Focus on existing customer relationships, acquiring
Slide 18: Bancassurance; Outlook for Personal & Business Banking
Bancassurance z Overall headline earnings contribution improved by 67% z Embedded credit life and funeral products - Commission grew by 18% - Underwriting income grew by 54% - Average policy value increased - Claims loss ratios reduced - Policy volumes up 15% - Customer base penetration maintained z
Slide 19: Standard Bank Argentina
Standard Bank Argentina z Integration complete - Rebranded 87 branches and 53 in-company mini branches as “Standard Bank” - Customer hand-over resulted in minimal fall-out - All systems standardised with Standard Bank Group systems - All Basel II and other risk and compliance functions fully integra
Slide 20: Standard Bank Argentina: CIB objectives
Standard Bank Argentina 2007 objectives for Corporate & Investment Banking z Retain corporate banking profile and customer base - 400 out of top 500 companies in Argentina z Introduce appropriate investment banking products and services from Standard Bank Group product range z Grow in the corporate
Slide 21: Corporate & Investment Banking
Corporate & Investment Banking z Total Income growth 45% to R9 127m z Headline earnings up 38% to R3 117m z Credit loss ratio 0.16% (June 2006: 0.24%) z ROE 27.1% (June 2006: 28.2%) z Cost-to-income ratio 52.2% (June 2006: 51.7%) % of group assets % of group headline earnings 50 50 49 51 Corporate &
Slide 22: Overview cont.; Abridged income statement
Overview cont. z Operating expenses higher to underpin sustainable growth - Investment in key people - Investment in infrastructure - Increased costs associated with business growth - Cost associated with Regulatory Requirements z Satisfying the requirements of Basel II remains a key priority z Stro
Slide 23: Income contribution; Global Markets
Income contribution 100% 26 26 31 31 31 26 80% 60% 34 35 34 33 34 41 40% 20% 40 39 36 35 35 33 0% 2002 2003 2004 2005 2006 HY07 Net interest income Trading revenue Fees and other revenue 45 Global Markets z Total income R4.2bn, up 65%, headline earnings R1.3bn, up 65% z Market characterised by highe
Slide 24: Diversified trading revenue; Global Markets
Diversified trading revenue June 2007 June 2006 Dec 2006 Rm Rm Rbn Commodities 655 632 1 078 Forex 1 140 1 035 2 014 Debt securities 1 643 519 1 480 Equities 245 91 290 Other 6 2 (10) Total trading revenue 3 689 2 279 4 852 47 Global Markets z Total income R4.2bn, up 65%, headline earnings R1.3bn, u
Slide 25: Global Markets – VaR and distribution of P&L
Global Markets – VaR CIB daily VaR 100 80 60 40 20 0 Rm -20 -40 -60 -80 -100 Jul 06 Aug 06 Sep 06 Oct 06 Nov 06 Dec 06 Jan 07 Feb 07 Mar 07 Apr 07 May 07 Jun 07 49 Global Markets – Distribution of P&L CIB trading book income distribution 60 50 Number of trading days 40 30 20 10 0 -20 to -15 -15 to -
Slide 26: Banking & Trade Finance; Investment Banking
Banking & Trade Finance z Total income R3.6bn, up 32%, headline earnings R1.2bn, up 44% - Good growth in Global Transactional Banking volumes, significant competitive pricing pressure - Growth in term and property lending books - Increased activity in Structured Trade Finance z Higher cross sell act
Slide 27: Outlook and activities
Outlook and activities z Maintain pace of development in infrastructure, systems, risk, regulatory and compliance z Macro-economic factors changing, pressures on interest rates and mounting concerns about inflated asset prices z Strong deal pipeline, continued client focus and cross sell culture z L
Slide 28: Liberty Life
Liberty Life z Liberty Life normalised headline earnings up 55% to R1 652m z Liberty Life normalised embedded value up 26% to R25.9bn z Liberty Life normalised ROEV 24.7% (June 2006: 17.4%) z Headline earnings contribution to Standard Bank up 56% to R514m z Liberty Life ROE 31.4% (June 2006: 22.5%)
Slide 29: Conclusion: Where to from here?
Jacko Maree Conclusion Where to from here? We are committed to making a real difference by providing financial services in South Africa and in other emerging markets In Africa Standard Bank must clearly be seen to be the leading bank z West Africa Nigeria, Ghana, Angola z East Africa Kenya, Tanzania
Slide 30: Where to from here? Nigeria IBTC Chartered
Where to from here? Currently in progress z Nigeria (IBTC Chartered) z Kenya acquisition (CFC) z Establish bank in Angola z Establish a branch in India Under consideration z Monoline retail banking opportunities 59 Nigeria IBTC Chartered z IBTC has strong investment and private banking platform z St
Slide 31: Basel II; Financial objectives remain
Basel II z Started project in 2001 - small project team analysing and creating awareness of requirements z In 2003 the business units took ownership of the project - decentralised approach ensured concepts entrenched at operating level z Board involvement since 2003 z Capital management key focus ar
Slide 32: Outlook
Outlook z Personal & Business Banking - Interest rate outlook in South Africa likely to make retail banking environment more challenging in second half of 2007 - Good foundation has been laid to benefit from appropriate product roll out in Africa which is progressing well z Corporate & Investment Ba