Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2010 Earnings Presentation
37 slides from Standard Bank's earnings presentation, March 2011
Slide 1: Financial results presentation for the year ended 31 December 2010
Standard Bank Group Financial results presentation for the year ended 31 December 2010 www.standardbank.com Financial highlights FY10 change FY09 % Headline earnings (Rm) 11 283 (4) 11 718 Headline EPS (HEPS) (cents) 715 9 715.9 (5) 756 9 756.9 Diluted HEPS (cents) 709.6 (5) 750.6 DPS (cents) 386 38
Slide 2: Income statement highlights
Income statement highlights FY10 change FY09 Rm % Rm Net interest income 28 927 (8) 31 493 Non interest revenue Non-interest 29 923 (4) 31 217 Total income 58 850 (6) 62 710 Credit impairment charges 7 524 (38) 12 097 Operating expenses 35 875 9 32 827 Restructuring costs 781 Banking activities head
Slide 3: Business unit view
Business unit view FY10 change Headline earnings mix Headline earnings Rm % Personal & Business Banking 4 750 23 12% Corporate & Investment Banking 5 248 (30) (1%) Central and other (108) (>100) 42% Banking activities 9 890 (15) Liberty 1 393 >100 SBG 11 283 (4) 47% FY10 FY09 ROE % % Personal & Busi
Slide 4: Balance sheet: Loans and advances
Balance sheet www.standardbank.com Loans and advances FY10 change FY09 Rbn % Rbn Personal & Business Banking 419 2 409 Mortgage loans 270 5 256 Instalment sale and finance leases 50 (7) 53 Card debtors 22 (2) 22 Other loans and advances 77 (0) 78 Corporate & Investment Banking 334 (7) 360 Banks 106
Slide 5: Deposit and current accounts
Deposit and current accounts FY10 change FY09 Rbn % Rbn Personal & Business Banking 396 2 389 Retail priced 206 4 198 Wholesale priced 190 0 191 Money market 40 2 40 Securitisation 14 (17) 16 Institutional funding 136 1 135 Corporate & Investment Banking 418 5 399 Central and other (17) 14 (19) Depo
Slide 6: Further compression of margin on interest earning assets
Income statement www.standardbank.com Further compression of margin on interest earning assets 500 12 27 450 450 38 8 400 405 350 300 250 basis FY09 Loan pricing Cost of funding* Endowment Change in composition FY10 of balance sheet and points other 12 * Loan funding cost + funding margin
Slide 7: Net interest income and non-interest revenue
Net interest income 35 000 3.4 30 000 3.2 25 000 3.0 20 000 2.8 15 000 2.6 10 000 2.4 5 000 2.2 11 619 13 357 17 001 22 896 32 117 31 493 28 927 0 2.0 Rm FY04 FY05 FY06 FY07 FY08 FY09 FY10 % Net interest income Net interest margin on total average assets 13 Non-interest revenue FY10 change FY09 Rm %
Slide 8: Credit impairments continue to improve
Credit impairments continue to improve FY07: 0.80 FY08: 1.55 FY09: 1.60 FY10: 1.04 50 2.0 1.86 1.84 40 1.6 30 1.31 1.31 1.2 20 1.04 1.04 0.84 0.8 10 0.78 0.4 0 ( 10) 0.0 Rbn 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 % Credit loss ratio Specifically impaired loans Net movement in specifically impaired
Slide 9: Cost-to-income ratio and operating expenses
Cost-to-income ratio 70 35 30 60 61.7 60.4 56.9 25 55 2 55.2 50 52.5 51.6 52.4 49.2 20 40 15 30 10 5 20 0 10 ( 5) 0 ( 10) % FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY10 excl % restructuring Cost-to-income ratio (LHS) Total income growth (RHS) Total cost growth (RHS) 17 Operating expenses FY10 change Rm %
Slide 10: Restructuring costs
Restructuring costs FY10 Rm Headcount Permanent staff retrenched 781 1 260 Johannesburg and London 610 953 Argentina 171 307 Contractors 688 Total reduction in headcount 1 948 19 Capital www.standardbank.com
Slide 11: Capital ratios and dividend per share
Capital ratios 14 700 12 600 10 500 8 400 6 300 4 200 2 100 0 0 % FY07* FY08 FY09 FY10 Rbn Core Tier 1 Tier 1 RWA 21 * Pro-forma Basel II basis Total dividend per share maintained • Dividend of 245 cents declared - Brings FY10 dividend to 386 cents - Cover ratio 1.9 times • Strong Tier I ratios • Ou
Slide 12: Corporate & Investment Banking
Corporate & Investment Banking Rob Leith www.standardbank.com Operating environment • 2010 was a challenging year for Corporate & Investment Banking - The global financial system was impacted by the Eurozone debt crisis - Implications p of regulatory g y reform - Reduced client activity - Competitio
Slide 13: Abridged income statement and key ratios
Abridged income statement and key ratios FY10 change FY09 Rm % Rm Net interest income 8 866 (15) 10 475 Non interest revenue Non-interest 13 797 (17) 16 545 Total income 22 663 (16) 27 020 Credit impairment charges 523 (81) 2 725 Operating expenses 14 720 6 13 937 Headline earnings 5 248 (30) 7 467
Slide 14: Contribution from product areas
Contribution from product areas Total income Headline earnings FY10 change FY09 FY10 change FY09 Rm % Rm Rm % Rm Global markets 9 657 (23) 12 463 2 116 (49) 4 142 Investment banking 6 424 3 6 252 2 548 75 1 459 Transactional products and 6 109 (11) 6 863 1 142 (30) 1 632 services Principal investmen
Slide 15: Trading revenue remained diversified
Trading revenue remained diversified 5 000 4 000 3 000 2 000 1 000 206 138 4 427 3 535 1 341 694 1 936 1 421 1 991 1 660 686 717 0 Rm Forex Credit Commodities Interest rate Equities Other FY09 FY10 29 We didn’t take on more risk to compensate for lower client flows 200 150 100 50 0 ( 50) ( 100) ( 15
Slide 16: Improved Investment banking performance
Improved Investment banking performance • Total income up 3% - Debt capital markets capitalised on an improved pipeline - Advisoryy franchise continues to g grow across all regions g - Cost of term funding still at elevated levels • Lower margin income due to reduced loan book and margin compression
Slide 17: Transactional products and services performance
Transactional products and services performance • Total income down 11% • Performance reflects - Negative endowment effect reducing margins - Transactional volumes down on subdued market conditions, cash balances up - Competition placing downward pressure on margins and fees - Growth in Investor Ser
Slide 18: Curtailed operations and response to improve ROE
Curtailed operations • Comprises distressed debt business in Asia and structured high net worth lending • Current year performance reflects - Fair value mark downs on SE Asian non-performing loan portfolios - Large single credit impairment • These businesses are being discontinued 35 Corporate & Inv
Slide 19: Personal & Business Banking
Personal & Business Banking Peter Wharton-Hood www.standardbank.com Operating environment • 2010 results reflect the challenging banking environment across the globe - Decreasing interest rates resulting in compressed margins - Highly g y competitive p environment • South Africa - Tentative economic
Slide 20: Operating environment and abridged income statement
Operating environment • Rest of Africa - Further strengthening of the Rand against African currencies - Increasing g consumer demand for credit • Outside Africa - Argentina • Solid cyclical rebound • Good growth in consumer credit demand • High g levels of inflation 39 Abridged income statement and
Slide 21: Results by geographic region
Personal & Business Banking results by geographic region • South Africa up 35% to R4.6bn on the back of improved credit environment - Despite margin compression from • Decline in average g pprime interest rate of 198bps p • More expensive term funding • Small loss in Rest of Africa (R14m) as we buil
Slide 22: Credit loss ratios per product
Credit loss ratios per product FY10 FY09 % % Mortgage lending 1.15 1.59 Instalment sale and finance leases 1 93 1.93 3 49 3.49 Credit cards 3.78 5.61 Other loans and advances 2.54 3.16 Personal & Business Banking 1.65 2.38 43 Personal & Business Banking balance sheet FY10 change FY09 Rbn % Rbn Loans
Slide 23: Personal markets
Personal markets • Improved distribution footprint - 904 new ATMs across our networks - 106 new branches in Rest of Africa - Internal service measure reached all time high • Transactions and savings - Number of personal current accounts up 11% - Strengthening of presence in the South African Youth m
Slide 24: Personal markets
Personal markets • Reduction in debt review portfolio from R9.1bn to R6.0bn - Uncertain credit regulatory environment • Dedicated Inclusive Banking g offering g in South Africa - Improved mobile banking capability - More than 50 loan centres - 7 500 installed and activated “bank shops” • Authorised
Slide 25: Business markets
Business markets • Strong market share in all key markets - In South Africa • Market share of 27% in commercial business market • Market share of 26% in SME market - Dominant position in trade services and VAF in Argentina • Dedicated Business Banking focus - 55% contribution to headline earnings -
Slide 26: Bancassurance and wealth
Bancassurance and wealth • South Africa - 34% growth in contribution from simple embedded products • Improved claims loss ratios and increased penetration to 39% - Strong sales growth in complex products - Good contribution from short-term insurance business • Rest of Africa - 20% increase in policy
Slide 27: Outlook 2011
Outlook 2011 • Improving economic environment • Ongoing cost containment as efficiencies extracted in mature markets • Investment for growth in our African markets • Increased emphasis on Business Banking opportunities • Innovation and expertise in mobile channels to be enhanced • Increased focus on
Slide 28: Wealth - Liberty headline earnings
Headline earnings – business unit view FY10 change FY09 Rm % Rm Retail insurance 899 >100 (82) Liberty Corporate 103 >100 (29) LibFin 1 443 >100 (8) Stanlib 361 0 362 Liberty Properties 96 20 80 Liberty Africa 10 (66) 29 Liberty Health (43) 9 (47) Other (272) (60) (170) Headline earnings 2 597 >100
Slide 29: Strategy and prospects overview
Strategy and prospects Sim Tshabalala and Jacko Maree www.standardbank.com Overview • The group is in good health • We are well capitalised, profitable and have a clear growth path - Despite uncomfortable ROE and cost-to-income cost to income ratios • Fundamental revision to strategy is unwarranted
Slide 30: Revenue and cost growth
Revenues declined in 2010 although 10 year growth rate remains high 80 10 yr CAGR 60 13.2% 14.6% 40 17.3% 20 0 Rbn FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 PBB CIB 59 Cost growth too fast for revenues 40 10 yr CAGR 14.7% 30 15.8% 20 15.6% 10 0 Rbn FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY0
Slide 31: Equity capital across the Group
Equity capital across the Group Equity Headline earnings 100 80 • Outside Africa consumes too much capital for 60 the current level % of total of returns 40 • CIB SA capital 20 would be higher on a stand-alone t d l basis 0 FY10 FY09 FY10 PBB SA CIB SA Central (surplus) Outside Africa Rest of Africa
Slide 32: Operations outside South Africa
Operations outside South Africa: where are we now? • Domestic universal banks in Africa - In various stages of maturity - Mostlyy we are building g • People and infrastructure • Which comes at a cost - We are looking for greater cost effectiveness - Achieving scale and efficiency at same time - Have
Slide 33: Challenges outside South Africa
What challenges are we now facing outside South Africa? • Change in global regulators’ approach – increasing capital and liquidity requirements • Relative size: outside SA size cannot be “too big” Regulatory/ - More difficult to reach scale outside SA rating agencies • Ratings agencies: more onerous
Slide 34: Strategy 2011
Strategy 2011 Previous vision We aspire to be a leading emerging markets financial services organisation Refined strategy • To build the leading African financial services organisation using all our competitive advantages to the full • We will focus on delivering superior sustainable shareholder val
Slide 35: Role of international operations in London
The role of Standard Bank’s international operations headquartered in London • The international operations are not a stand-alone business • They are integral to the group strategy • London contains our dollar balance sheet for cross cross-border border business • We attract and employ specialist sk
Slide 36: Change in responsibilities of Deputy Group CEOs
Change in responsibilities of Deputy Group Chief Executives to better execute our strategy in banking operations Business Lines Ben Kruger Customer focus CIB Marketing PBB Standard Bank of South Africa Sim Tshabalala Operating Entities Banks outside South Africa Operations Peter Wharton-Hood Infrast
Slide 37: Remuneration and Prospects
Remuneration • Incentive remuneration above a certain level is deferred for 3 years - Up to 40% in SA, 60% in International • Deferrals are linked to Standard Bank share price • Clawbacks of deferrals in defined circumstances • Equity Growth Scheme subject to conditionality - Significant loss of pri