Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2004 Earnings Presentation
34 slides from Standard Bank's earnings presentation, March 2005
Slide 1: 2004 Annual results presentation
2004 Annual results presentation Agenda z Financial highlights Simon Ridley z Business unit overviews - Retail Banking Peter Wharton-Hood - Africa Sim Tshabalala - Corporate and Investment Banking Ben Kruger - International Rob Leith z Conclusion Jacko Maree 2 1
Slide 2: Financial highlights
Financial highlights % 2004 Change 2003 Headline earnings (Rm) 7 648 22 6 280 Headline eps (cents) 578.7 23 470.7 Fully diluted headline eps (cents) 562.3 21 464.9 Dividend cover (times) 2.5 3.1 Dividend per share (cents) 231.5 53 151.0 ROE (%) 26.4 22.9 Credit loss ratio (%) 0.43 0.91 Cost-to-incom
Slide 3: Financial highlights normalised
Financial highlights normalised 2004 2004 2004 Disclosed Normalised Objective Headline earnings (Rm) 7 648 7 621 Headline earnings growth (%) 22 21 Headline eps (cents) 578.7 566.3 Headline eps growth (%) 23 20 14.3 ROE (%) 26.4 24.5 20.0 NAV per share (cents) 2 322 2 465 Full effect of empowerment
Slide 4: Group income statement highlights
Group income statement highlights 2004 % 2003 Rm Change Rm Net interest income 11 451 0 11 437 Provisions for credit losses 1 048 (43) 1 848 Net interest income after provisions 10 403 8 9 589 Non-interest revenue 15 048 18 12 790 Operating expenses 15 242 12 13 608 Taxation 2 878 5 2 741 Group head
Slide 5: Headline earnings analysis by business unit
Headline earnings analysis by business unit 2004 % 2003 Rm Change Rm Domestic Banking 5 842 27 4 602 Retail Banking 3 158 28 2 476 Corporate & Investment Banking 2 656 24 2 140 Other domestic operations 28 (14) Africa 634 30 489 International 685 (21) 866 International USD 107 (7) 115 Stanlib 59 48
Slide 6: Return on equity
Return on equity 35 30 * 30 25 25 20 20 15 15 10 10 5 5 0 0 1998 1999 2000 2001 2002 2003 2004 Rm % Ordinary shareholders' funds ROE * 2004 normalised 11 Returns on equity 2004 2003 2004 Cost of equity % % % Domestic Banking 32.3 31.3 13.7 Retail Banking 36.8 35.2 Corporate & Investment Banking 35.8
Slide 7: Margin analysis
Margin analysis 4.5 24 22 4 20 3.5 18 16 3 14 2.5 12 2 10 8 1.5 6 1 4 % 1998 1999 2000 2001 2002 2003 2004 % Ave prime rate (RHS) Group margin (LHS) Group margin after credit losses (LHS) 13 Domestic margin analysis % Margin at December 2003 3.73 Items previously netted in derivative balances (0.05)
Slide 8: Non-interest revenue
Non-interest revenue 16 000 70 14 000 65 12 000 60 10 000 55 8 000 50 6 000 45 4 000 40 2 000 35 0 30 1998 1999 2000 2001 2002 2003 2004 Rm % Fees & commission Other NIR NIR as a % of total income 15 Non-interest revenue z Fees & commission revenue +24%, volume driven - Retail Banking +18% - Africa
Slide 9: Operating expenses
Operating expenses z Staff costs +12% - General staff scheme R127m - Pension fund provision top up R150m - Additional incentives & related costs up R170m z Other operating expenses +12% - Direct IT costs +13% - Other operating expenses generally increased in line with business volumes 17 Cost-to-inc
Slide 10: Balance sheet highlights
Balance sheet highlights 2004 % 2003 Rbn Change Rbn Cash & short-term securities 52 18 44 Loans & advances 257 17 220 Total banking assets 506 14 444 Deposits 316 16 273 Total shareholders’ funds 32 11 29 Total banking equity & liabilities 506 14 444 19 Loans & advances 2004 % 2003 Rbn Change Rbn Do
Slide 11: Credit loss history
Credit loss history 6 5 4 % of Advances 3 2 1 0 1998 1999 2000 2001 2002 2003 2004 Income statement charge Balance sheet provision NPLs 21 Credit provisioning 2004 % 2003 Rm Change Rm Provision for non-performing loans (specific) 1 041 (26) 1 398 Provision for performing loans (general) 7 (98) 450 T
Slide 12: NPLs & balance sheet provisioning
NPLs & balance sheet provisioning 2004 2003 2004 2003 Rm Rm % of adv % of adv Gross NPLs 3 910 4 813 1.5 2.1 Provision for NPLs 2 335 2 418 0.89 1.08 Provision for performing loans 1 461 1 490 0.56 0.66 Total provisions 3 796 3 908 1.45 1.74 NPL coverage ratio (provision for NPLs as a percentage of
Slide 13: Tier I capital and dividend policy
Tier I capital Tier I % Target range 9 to 10 December 2004 11.5 Reserved for - 2004 final dividends (0.9) - future growth initiatives (0.8) Capital to support business 9.8 z Strong ratio allows: - Revised dividend policy - Acquisitions to support business plans - Possible share buy-backs to eliminat
Slide 14: Retail Banking environment
Retail Banking Peter Wharton-Hood Retail Banking environment z Higher disposable income - Generous wage settlements - Consecutive tax cuts - Employment gains z Wealth effect of asset prices - Equity and property z 14% growth in private sector credit extension (PSCE) confirms that spending growth lar
Slide 15: Retail Banking highlights and key products
Highlights z Service levels maintained despite increased volumes & new legislation z Further improved customer segmentation initiatives z Sales targets exceeded z Very strong asset growth resulted z Account & volume growth across all products contributed to strong growth in fee & commission income z
Slide 16: Retail market shares and credit
Retail market shares % 32 Card Home Loans 27 Other lending 22 Deposits Total vehicle and asset finance 17 2001 2002 2003 2004 31 Credit z Credit scorecards & data inputs have been enhanced - Improvement in quality & scope of underlying data sources - Consequent lift in predictive capability - Credit
Slide 17: Home loans and Vehicle & Asset Finance
Home loans z Number of registrations up 37% z Rand value of registrations up 65% z Market share of new business 28% (2003: 26%) - Including all origination channels z Growth drivers: - Operational processing efficiencies - 66% of applications granted in 7 days (Jan 2004: 51%) - Performance agreement
Slide 18: Card and transaction accounts
Card z Credit cards - Number of cards +10% - Number of transactions +15% - Rand value of turnover +25% z Point of sale terminals - Number of transactions +16% - Rand value of merchant sales +17% z Close relationship between card division & branch network z Barclaycard division performing well 35 Tra
Slide 19: Other lending and Wealth
Other lending z 14% growth in number of customers - Overdrafts - Revolving credit - Medium term loans z Higher demand for credit z 17% growth in balances z Increased cross selling z ABIL book grown to R568m (2003: R381m) 37 Wealth Embedded products Commission Number Penetration received of policies
Slide 20: Distribution channels and focus areas
Distribution channels z Challenging year - Increased volumes - FICA - FAIS - Mzansi z Rated number 1 in customer satisfaction ratings (CUSSATS) z Increased cash volumes up 7% z Declining cheque volumes down 13% - Joint processing with ABSA z 741 Points of representation (2003: 708) - 19 ‘banks in a
Slide 21: Africa highlights
Africa Sim Tshabalala Highlights z Improved earnings growth despite - Continued Rand strength - Margin pressure z Delineation between retail & wholesale progressing well z Continued improvement in credit management - Restructured wholesale & retail credit support functions z Governance, legal & comp
Slide 22: Africa Retail Banking
Retail Banking z Rolled-out customer value propositions - Salaried market & business banking z Introduced Executive Banking Suites in 12 countries z Launched business banking platforms - 90 branches, serving 74 000 business banking relationships z Closed product gap - Introduction of cross-border tr
Slide 23: Africa Wholesale Banking
Wholesale Banking z Wholesale Banking integration with CIB concluded z Bedded down in-country operating model - Aligned to CIB ‘best practice’ z Launched Africa Relationship Management model z Launched Transactional Services model - Further grow non interest income & build cheaper core deposit base
Slide 24: Going forward / Corporate & Investment Banking
Going forward z Continue to improve operational efficiencies & grow customer base z Further ongoing process of integration with rest of group z Increased investments in human capital z Focused search for acquisition opportunities in key markets 47 Corporate & Investment Banking Ben Kruger 24
Slide 25: CIB highlights and diversified income streams
Highlights z Business performing well all round z Static net interest income due to low interest rates z High level of credit recoveries z Good growth in advisory & transactional revenues z Increased contribution from trading income z Realisations of private equity & property investments boosted Inv
Slide 26: Global markets and banking & trade finance
Global markets z Increased Foreign Exchange revenues assisted by sustained volatility & volume growth z Commodities performance subdued z Debt capital markets performed well under stable market conditions z Equity derivatives delivered another good performance z Record levels for debt origination z
Slide 27: Structured debt and corporate finance
Structured debt & property finance z New business flows in asset-backed financing z Reduced appetite for tax based structures z Growth in Property Finance lending book z Continued participation in Black Economic Empowerment transactions 53 Corporate finance & investments z Increased advisory fees in
Slide 28: Going forward / International
Going forward z Maintain revenue diversity z Unrelenting customer centred focus z More of the same as in recent years z Replace private equity & property realised equity positions z Participate in domestic infrastructure & empowerment financing & advisory 55 International Rob Leith 28
Slide 29: International highlights and global markets
Highlights z All round satisfactory results – marginally below USD budget z Strong customer flows z Increased geographic & product penetration z Provisions raised against mining & energy exposures z Upgrade of IT, risk & support structures 57 Global markets z Year of strong growth z Increased custom
Slide 30: Commodities & resources; banking & trade finance
Commodities & resources z Base metals - Record performance - Growth in client activity – notably China - Sustained price rises, increased price volatility z Precious metals - Steady volumes - Reduction in hedging activities of gold producers z Energy - Improved market position z Growth in structured
Slide 31: Global wealth management and going forward
Global wealth management z Strong growth in private client deposit base z Margin pressure in offshore businesses z 3rd party investment assets under management > US$3bn z Satisfactory investment performances 61 Going forward z Focus on existing core products & key geographic regions z Concentrate on
Slide 32: Conclusion: Reflecting on 2004
Conclusion Jacko Maree Reflecting on 2004 z Black Ownership Initiative implemented z Outward focus has returned z Retail Banking benefiting from years of re-engineering z Another good year for Corporate & Investment Banking z International slightly disappointing – year of consolidation z Africa 30%
Slide 33: Looking forward and financial objectives
Looking forward z Retail Banking – ongoing benefit from lower inflation & interest rates z Corporate & Investment Banking – funding infrastructure & empowerment z Further roll out of retail banking in Africa z International – growth off a stronger platform z Liberty – more of the same 65 Financial o
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