Standard Bank Group Limited · JSE:SBK
Standard Bank — H1 2002 Earnings Presentation
40 slides from Standard Bank's earnings presentation, September 2002
Slide 1: Standard Bank Group Limited
Standard Bank Group Limited September 2002
Slide 2: Financial performance
Financial performance 350 335 64 63 300 283 62 250 227 182 61 200 156 60 cents 178 165 59 % 124 150 58 92 93 100 57 181 153 153 56 127 50 86 103 72 55 0 54 1997 1998 1999 2000 2001 HY 2001 HY 2002 Headline EPS - first half Headline EPS - second half Cost-to-income ratio 2
Slide 3: Financial performance
Financial performance 450 2500 400 350 2000 300 1500 250 cents Rbn 200 1000 150 100 500 50 0 0 1997 1998 1999 2000 2001 HY 2001 HY 2002 Total assets NAV per share 3
Slide 4: Dividend yield and PE ratio
Dividend yield and PE ratio 3.5 14 3.0 13 12 2.5 % 11 X 2.0 10 1.5 9 1.0 8 1997 1998 1999 2000 2001 Year June 2002 Dividend yield PE ratio 4
Slide 5: Headline earnings per business unit
Headline earnings per business unit Commercial Banking SCMB 11% 23% Retail Banking 31% International Operations 13% Properties Stanbic Africa STANLIB Liberty 3% 2% 8% 9% As at 30 June 2002 5
Slide 6: Headline earnings breakdown
Headline earnings breakdown June ’02 % June ’01 Rm change Rm Domestic operations 1 638 23 1 334 Retail Banking 761 22 625 SCMB 580 23 471 Commercial Banking 276 26 219 Properties 62 7 58 Central services (41) (39) International Operations 336 23 274 Stanbic Africa 231 26 183 STANLIB 41 3 40 Central
Slide 7: Summarised balance sheet
Summarised balance sheet June ’02 % change June ’01 Rbn Rbn Cash and short-term funds 60.9 104 29.8 Advances 162.0 18 137.8 Other assets 104.2 62 64.5 Total banking assets 327.1 41 232.1 Liberty 89.3 14 78.1 Total assets 416.4 34 310.2 Shareholders’ funds 25.6 31 19.5 Minorities 6.4 22 5.3 Deposits
Slide 8: Headline return on equity
Headline return on equity 30 25 25 20 20 15 Rbn 15 % 10 10 5 5 0 0 1997 1998 1999 2000 2001 HY 2001 HY 2002 Shareholders' funds ROE 8
Slide 9: Returns on capital
Returns on capital June June ’02 ’01 ROE ROE % % Domestic operations 27 26 Retail Banking 28 25 SCMB 28 30 Commercial Banking 32 30 Properties 19 20 International Operations (GBP) 10 12 Stanbic Africa 24 33 Central Funding, Liberty, STANLIB 9 14 9 Standard Bank Group 19 21
Slide 10: Internal Rate of Return – International Operations
Internal Rate of Return – International Operations Period IRR% Rand Jan ‘92 – Dec ‘01 10 years 25% Dec ’96 – Dec ‘01 5 years 28% 10
Slide 11: Funds margin analysis
Funds margin analysis 4.5 4.0 3.5 3.0 2.5 % 2.0 1.5 1.0 Standard Bank Group 0.5 0.0 1997 1998 1999 2000 2001 HY 2001 HY 2002 Net interest margin Net interest margin after provision for credit losses 11
Slide 12: Net interest margin
Net interest margin % Average funds margin June 2001 3.54 Domestic operations (0.30) Average prime interest rate 2001: 14.45%; 2002: 14.59% Lending margin (0.17) - Competitive pricing Growth in low margin wholesale money market assets (0.29) (Low capital utilisation) Higher branch deposits and endow
Slide 13: Composition of NII vs NIR
Composition of NII vs NIR 100% 80% 45% 47% 49% 51% 53% 52% 52% 60% 40% 55% 53% 51% 49% 47% 48% 48% 20% 0% 1997 1998 1999 2000 2001 HY 2001 HY 2002 % Net interest income % Non-interest revenue 13
Slide 14: Provision for credit losses
Provision for credit losses 2.0% 0.3% 1.6% 0.2% 1.2% 0.8% 0.1% 0.4% 0.0% 0.0% 1997 1998 1999 2000 2001 HY 2001 HY 2002 % Specific debt provision: ave loans and advances (LHS) % General debt provision: ave loans and advances (RHS) 14
Slide 15: Non-performing loans
Non-performing loans 6.0 June June ‘02 ‘01 4.0 Coverage: 68% 54% % Gross 2.0 Coverage: Net 181% 159% 0.0 1999 2000 2001 HY HY 2001 2002 Gross NPLs (% of average loans and advances) 15
Slide 16: Operating expenses
Operating expenses 26 25 21 19 20 18 15 18 15 16 % 10 8 11 11 5 9 5 7 4 0 1997 1998 1999 2000 2001 HY 2001 HY 2002 Domestic cost growth Overall cost growth 16
Slide 17: Business units’ cost-to-income ratio
Business units’ cost-to-income ratio June ’02 June ’01 % % Domestic operations 55.4 57.2 Retail Banking 62.5 64.2 SCMB 50.7 52.5 Commercial Banking 39.3 40.0 Properties 30.5 29.3 International Operations 65.2 62.8 Stanbic Africa 58.9 54.4 Standard Bank operations 57.5 57.7 17
Slide 18: Capital adequacy
Capital adequacy 16 14 • Group capital 12 adequacy 14.8% 10 % 8 • Blended requirement 6 of 10.8% plus 1% 4 2 buffer 0 • Domestic total capital 1997 1998 1999 2000 2001 HY HY 2001 2002 Primary capital Secondary capital ratio 12%, tier I capital Tertiary capital Required capital ratio 7.9% 18
Slide 19: Retail Banking
Retail Banking Standard Bank Group
Slide 20: Retail Banking
Retail Banking • Home loans – Record grant and registration levels – Market share increased to 16.3% from 15.5% • Card business – Strong sales focus utilising network delivering results – Improved quality of book • Transactional banking – Increased savings levels from customers, up 10% – Improved le
Slide 21: Retail Banking
Retail Banking • Bancassurance – Embedded products % Penetration 2002 2001 Home Loan Protection 11.6 8.7 Personal Loan Protection 26.9 22.3 Funeral plan 14.6 11.2 – Complex products • Standard Bank Financial Consultancy (SBFC) is increasing distribution capacity • First year commission 13% up 21
Slide 22: Retail Banking
Retail Banking • Pricing being simplified and standardised • Infrastructural investments made • Focus over past 2 years has been process and internally related • Product development and customer service now the major focus 22
Slide 23: SCMB
SCMB Standard Bank Group
Slide 24: SCMB
SCMB Revenue per business unit 4% 13% 23% 5% 22% 33% Treasury Foreign Banking Corporate and Investment Banking Custody Project and structured finance Electronic Banking 24
Slide 25: SCMB
SCMB • All business areas improving performance and profitable • Lower volatility in earnings, more mature risk management • Market share positions maintained • Improved client focus • Aggressively managing transformation 25
Slide 26: Stanbic Africa
Stanbic Africa Standard Bank Group
Slide 27: Stanbic Africa
Stanbic Africa • Present in 17 African countries outside SA • Integration of acquisitions progressing well • Upgrade of banking technology on track • Close relationship with group centres of excellence • Team formed identifying specific retail opportunities • Boosted financial and risk capability at
Slide 28: International Operations
International Operations Standard Bank Group
Slide 29: International Operations
International Operations Key business areas • Resource banking – 47% GBP increase from precious and base metals – Positive contribution from energy activities • Debt capital markets – Decreased contribution from customer businesses – Proprietary trading +35% • Private Banking – Banking and trust adm
Slide 30: International Operations
International Operations Balance sheet • Total assets up £1.2bn (22%) on 31 Dec 2001 • Major asset increases include £550m collateral management, £170m customer leverage (debt capital markets), £120m lending activities • 70% of exposures rated as investment grade 30
Slide 31: International Operations
International Operations Balance sheet diversification Exposures by geographic region Total Banks/ Corporate Sovereign % % % Europe 37 21 16 North America 22 10 12 Asia 15 8 7 Sub-Saharan Africa 10 5 5 Eastern Europe 6 3 3 South America 5 4 1 Middle East 5 3 2 Total 100 54 46 31
Slide 32: International Operations
International Operations Balance sheet liquidity • Of total assets, 45% saleable within 8 days; 68% within one month • 70% of total assets are marked-to-market or cash • Funding sources: 21% corporate deposits, 21% retail deposits, 6% group, 28% bank deposits, 24% repos 32
Slide 33: International Operations
International Operations Provisioning adequacy • Specific provisioning charge of £10.3m (2001, £2.6m) reflects extremely tough credit markets • GDP charge £4.0m (2001, £2.7m). Balance sheet GDP of £27.9m (31 Dec 2001, £24.2m) • Liquidity provisions against trading book valuations and structural prov
Slide 34: Future view of the Group
Future view of the Group 100% 30% 65% 100% Retail & Life Wealth Merchant & Commercial Investment Assurer Banking Banking • South Africa STANLIB SCMB • Africa International Africa 34
Slide 35: The South African macro environment
The South African macro environment
Slide 36: Economic outlook
Economic outlook • Macroeconomic stability has been achieved • Reduced political risk • Rand-induced price pressures not likely to be lasting • Domestic economy resilient amid global weakness • Healthy internal growth dynamic supported by – tax relief – historically low nominal interest rates – low
Slide 37: Interest rates and inflation
Interest rates and inflation Forecast 30 • Limited downside for interest rates in short- 25 term 20 • Authorities seek to secure inflation targets % 15 for 2003/4 10 • SA not be able to reflate as strongly as some 5 3-6% inflation target developed countries 0 • Interest rates should 1998 1999 2000 2
Slide 38: Financial Sector Summit
Financial Sector Summit • Co-operative, not confrontational • With government, business, community and labour (August 2002) • Agreed to: – Ensure basic financial services – Create sustainable institutions to serve the poor – Address the micro-lending problem – Regulation of credit bureaux – Discrimi
Slide 39: Government statements on the financial sector
• “It is most encouraging that our respective teams have been able to take a fresh look at the important role of the financial sector in South Africa and come up with proposals in a number of key areas.” Trevor Manuel, Minister of Finance, 20 August 2002 • “Government is committed to further engagem
Slide 40: Standard Bank Group
Standard Bank Group