Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2008 Earnings Presentation
34 slides from Standard Bank's earnings presentation, 2009
Slide 1: Financial results presentation for the year ended 31 December 2008
08 Financial results presentation for the year ended 31 December 2008 Financial highlights 2008 change % 2007 Headline earnings (Rm) 14 150 8 13 153 Headline EPS (HEPS) (cents) 942.6 (2) 960.6 Diluted HEPS (cents) 935.6 (1) 947.5 DPS (cents) 386.0 0 386.0 NAVPS (cents) 5 633 32 4 255 ROE (%) 18.2 24
Slide 2: Group income statement highlights
Group income statement highlights 2008 change 2007 Rm % Rm Net interest income 32 117 40 22 896 Non-interest revenue 29 448 19 24 747 Total income 61 565 29 47 643 Credit impairment charges 11 342 147 4 590 Operating expenses 30 390 23 24 706 Banking activities – headline earnings 13 509 11 12 180 L
Slide 3: Geographic snapshot and loans and advances
Business unit review Geographic snapshot Headline Headline Headline earnings earnings earnings growth mix ROE 2008 Rm % % % South Africa (Banking activities) 10 275 5 72 26.9 South Africa (Liberty) 641 (34) 5 12.8 South Africa 10 916 1 77 25.2 Rest of Africa 1 862 46 13 16.2 Outside Africa 1 378 12
Slide 4: Deposit and current accounts; Loan-to-deposit ratio
Deposit and current accounts SBSA funding mix 2008 change 2007 Rbn % Rbn 19% Personal & Business 31% 372 13 329 Banking 3% Retail priced 174 14 152 5% Wholesale priced 198 11 177 Money market 40 40 28 9% Securitisation 18 (5) 19 3% 30% Intragroup from CIB 140 8 130 Retail customers (2007: 19%) Corpo
Slide 5: Liquidity
Liquidity Long-term funding ratio - SBSA o Consolidated liquidity risk management remained a 29 key focus 27 o Structural liquidity mismatch maintained 25 within internal limits and 23 guidelines 21 o Group unencumbered 19 surplus liquidity of R97bn (2007: R68bn) 17 o Group long-term funding 15 rati
Slide 6: Margin on interest earning assets; Non-interest revenue
Margin on interest earning assets 37 500 35 000 0.05% (0.12%) 0.47% 4.62% 2 782 496 (727) 33 729 32 500 0.09% 0.04% (0.14%) 0.09% 0.13% 542 244 (819) 30 000 512 6 309 747 27 500 25 000 4.01% 22 500 23 643 20 000 17 500 15 000 Dec 2007 Volume Impact of IAS 39 Loan pricing Loan Deposit Endowment Other
Slide 7: Credit impairment trends
Credit impairment trends 2.0 25 1.6 20 1.60 1.55 1.2 1.27 15 1.07 1.06 1.02 0.94 0.8 0.87 10 0.80 0.74 0.71 0.56 0.60 0.4 5 0.41 0.36 0.0 0 % 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 % Credit loss ratio Medium-term target Average prime lending rate in SA 13 Credit i
Slide 8: Operating expenses; Cost-to-income ratio
Operating expenses 2008 change o Cost containment in South Rm % Africa Staff 16 951 17 – Below inflation growth Personal & Business Banking 8 834 21 7.5% Corporate & Investment Banking 7 688 14 – Staff cost growth 5% Central and other 429 (2) – Other operating Other 13 439 32 expenses growth 11% Per
Slide 9: Net asset value movements; Group return on equity
Net asset value movements Increase on opening 2008 balance % Rbn Opening balance – 1 January 2008 58.4 Transactions with shareholders 16.4 9.5 Shares issued to ICBC 27.3 15.9 Net of shares issued for share schemes and share buy-backs (0.5) (0.3) Distributions paid (10.4) (6.1) Transactions with mino
Slide 10: Capital adequacy; Economic capital by risk type
Capital adequacy 15 Tier I Total 0.4 % % 12 0.3 1.8 SBSA 2.6 0.9 Capital adequacy ratio 9.3 12.2 9 9.8 1.0 Regulatory minimum 7.00 9.75 7.7 6 Target 9 11 - 12 Group 3 Capital adequacy ratio 10.7 12.9 0 Regulatory minimum 7.00 9.75 % 2007 ProForma 2008 Target 9 11 - 12 Tier I - equity Tier I - pref s
Slide 11: Distribution per share; Personal & Business Banking
Distribution per share 400 4.0 3.2 3.1 300 2.5 2.5 2.5 2.5 2.4 3.0 200 2.0 100 1.0 124 151 232 267 320 386 386 0 0.0 cents 2002 2003 2004 2005 2006 2007 2008 times Distribution per share Distribution cover o Important to incrementally raise capital – Asset growth is continuing – Alternate sources of
Slide 12: PBB highlights in 2008
Highlights in 2008 o Sensible proactive headcount and cost management o Number 1 in Customer Service in South Africa o Increased distribution footprint o Leader in Business Banking in South Africa o Liabilities growth exceeded asset growth o Significant tightening of risk appetite o IT investment de
Slide 13: Strong income growth from banking activities
Strong income growth from banking activities 35 000 33 503 6.0% o Net interest income 29% 13 557 30 000 – Average asset growth of 19% 27 044 – Includes R951m unwind of 25 000 11 587 discount on expected 5.0% recoveries 20 000 19 946 o Net interest margin 40bps – Endowment impact (+56bps) 15 000 15 4
Slide 14: Increased credit impairment charges
Increased credit impairment charges 10 000 9 196 117% 8 000 6 000 4 240 4 067 4 000 2 311 2 000 0 Rm 2007 2008 Credit impairment charges Actual impaired accounts written off 27 Increased credit impairment charges 10 000 9 196 117% 1 639 8 000 6 000 6 821 4 240 4 000 839 2 000 2 851 550 736 0 Rm 2007
Slide 15: Credit impairment charges and loss ratios by product
Credit impairment charges by product 2008 change 2007 Rm % Rm Mortgage lending 3 506 232 1 056 Instalment sale and finance leases 1 667 83 909 Card products 2 194 48 1 480 Other loans and advances 1 829 130 795 Personal & Business Banking 9 196 117 4 240 29 Credit loss ratios by product Dec 2008 Jun
Slide 16: PBB South Africa mortgage lending book maturing
PBB South Africa mortgage lending book maturing Mortgage lending age distribution 100% 24% 27% 80% 42% 25% 60% 30% 40% 35% 51% 20% 43% 23% 0% 2006 2007 2008 ≤ 1 year 1 - 2 years ≥ 2 years 31 PBB South Africa mortgage lending book shows favourable balance to current market value statistics Balance to
Slide 17: Mortgage impaired loans continue to rise
PBB South Africa mortgage lending book’s impaired loans continue to rise Dec 2008 Jun 2008 Dec 2007 Rm Rm Rm Gross advances 244 252 228 881 213 612 Current 219 672 212 555 206 044 Early arrears (30-89 days) 8 525 6 398 2 316 Impaired (90+days) 16 055 9 928 5 252 Value of security (12 896) (8 029) (4
Slide 18: Contribution from transactional products
Significant contribution to headline earnings from transactional products Headline earnings 2008 change 2007 Rm % Rm Mortgage lending (902) (>100) 822 Instalment sale and finance leases (264) (>100) 66 Card products 342 3 333 Transactional and lending products 4 905 32 3 718 Bancassurance 703 (4) 73
Slide 19: Strong growth in Africa; 2009 market environment
Strong growth in Africa o Headline earnings up 72% o Business model and strategy learnings in home base replicated where appropriate o Good balance between service, transactions, sales and lending o Organic growth across the 13 countries in which there is a retail presence – Greater product availabi
Slide 20: Looking ahead to 2009 – PBB response
Looking ahead to 2009 – PBB response o Consequently we will: – Focus on customer debt management – Further consolidate and improve service levels – Deliver further sensible cost containment initiatives whilst still investing in infrastructure and future growth – Extract additional operational effici
Slide 21: 2008 Market environment and CIB response
2008 Market environment o Crisis in the global financial system – Liquidity froze and access to credit dried up – Capital severely constrained – Banks and funds default – Asset prices collapse – Ability to distribute/syndicate ceased – Policy intervention by governments globally – Confidence in bank
Slide 22: Active balance sheet management
Active balance sheet management Loans and advances o Loans and advances R64.8bn R49.3bn R408.1bn – Robust growth 1H08 R45.5bn (R36.3bn) – Slowed in 2H08, through Translation limited origination and De- effect 2H08 leverage deal pipeline management R55.6bn – Active steps to deleverage with reduced re
Slide 23: CIB abridged income statement and product areas
CIB abridged income statement and key ratios 2008 change 2007 Rm % Rm Net interest income 10 571 55 6 804 Non-interest revenue 15 620 20 12 965 Total income 26 191 32 19 769 Credit impairment charges 1 647 559 250 Operating expenses 13 306 26 10 590 Headline earnings 7 967 19 6 706 ROE (%) 22.2 27.0
Slide 24: Global Markets performance
Global Markets - a strong performance in the midst of continued market turmoil o Total revenue increased 47% to R11.2bn (2007: R7.6bn) o Headline earnings increased 51% to R3.5bn (2007: R2.3bn) o Risk levels well contained - able to capitalise on trading opportunities around client franchise given t
Slide 25: Volatility increased, risk levels contained
Volatility increased, but risk levels well contained Lehman collapse 250 200 150 100 50 0 -50 -100 -150 -200 -250 Rm Jan Dec Income of trading units 95% VaR (including diversification benefits) 99% VaR (including diversification benefits) 49 Distribution of daily trading P&L 80 60 Frequency of tradi
Slide 26: Investment Banking and Transactional Products & Services
Investment Banking delivered a resilient performance o Revenue increased 16% to R9bn (2007: R7.8bn) o Headline earnings decreased 12% to R2.7bn (2007: R3bn) o Higher net interest income due to improved margins, good growth in loans and advances; with increased provisions for credit losses o Signific
Slide 27: Credit impairments; BEE transactions
Credit impairments o Credit impairment charges increased to R1 647m (2007: R250m) – Non-performing loans charge of R889m (2007: R74m) – Performing loans charge of R758m (2007: R176m) o Credit loss ratio increased to 0.46% (2007: 0.10%) o Non-performing loans charge reflects point in time market cond
Slide 28: Operational efficiencies; CIB outlook
Notable improvement in operational efficiencies o Cost-to-income ratio improved to 50.5% from 53.1% o Operating expenses up 26% to R13.3bn (2007: R10.6bn) reflecting increased footprint post recent acquisitions and unfavorable translation impact o Staff Costs increased 14% to R7.7bn (2007: R6.7bn) –
Slide 29: Looking ahead to 2009 – CIB response; Liberty
Looking ahead to 2009 – CIB response o Reaffirmed CIB strategy with more defined execution in key focus areas – Integrated CIB business model with a narrower focus given market developments – Tighter definition of target markets, segments and products – Delivering value to core customers in this cha
Slide 30: Liberty transaction and results
Liberty transaction o Effective economic interest in Liberty increased from 32.8% to 53.7% o Investment required R4.4bn o Part of our strategy to be a full service financial services organisation – Align our economic exposure with our strategic and commercial contribution to Liberty o Timing (May) a
Slide 31: Liberty headline earnings and outlook
Liberty headline earnings as published 2008 Change % 2007 Life assurance 885 (50) 1 784 Individual Life 1 255 (8) 1 369 Corporate 152 29 118 LibFin (522) 297 LibFin shareholders 451 (51) 919 Stanlib 395 (3) 407 Properties 64 39 46 Liberty Africa (1) 16 Healthcare (3) Other (175) 13 (155) Pension fun
Slide 32: Conclusion
Conclusion Jacko Maree Resilient group result in the face of global turmoil o Excellent organic revenue growth o Absorbed substantial credit impairments o Positive contribution from recent acquisitions o Strong capital and liquidity position o 150 year old franchise – Strong retail and corporate dep
Slide 33: Nigeria and Argentina acquisitions; ICBC cooperation
Recent acquisitions in Nigeria and Argentina o Contributing positively – Included in group results for a full year for the first time o Nigeria results not yet released on NSE o Both Argentina and Nigeria headline earnings for 2008 greater than what we advised the market 12 months ago o Continued lo
Slide 34: Prospects
Prospects o Global financial turmoil set to continue o SA to slow down markedly o Financial objectives not published for 2009 – Due to prevailing volatility in financial markets o Achieving similar results in 2009 to 2008 would be considered a good outcome o Continuing search for acquisitions o Purs