Standard Bank Group Limited · JSE:SBK
Standard Bank — FY2002 Earnings Presentation
70 slides from Standard Bank's earnings presentation, 2003
Slide 1: Blueprint for growth
blueprint for growth 1
Slide 2: Results presentation
Results presentation For the year ended 31 December 2002 Financial highlights Jacko Maree Business unit and Group overview Myles Ruck 2
Slide 3: Main drivers of Group performance
Main drivers of Group performance • Domestic margins widening slightly after years of gradual tightening • Non-interest revenue continued strong growth • Domestic credit risk well managed • International credit risk impacted performance • Internal generation of capital • Cautious acquisition strateg
Slide 4: Key financial statistics
Key financial statistics Standard Bank Group Dec % Dec ‘02 change ‘01 Headline earnings Rm 5 263 19 4 419 Headline EPS cents 396 18 335 Dividends per share cents 124 22 102 Cost-to-income ratio % 57.3 57.4 Headline ROE % 20.3 20.1 Translation (reversal)/gain Rm (3 271) 4 037 NAV per share cents 1 95
Slide 5: Income statement highlights
Income statement highlights Standard Bank Group Dec ’02 % change Dec ’01 Rm Rm Net interest income 10 533 29 8 177 Non-interest revenue 11 435 25 9 135 Total income 21 968 27 17 312 Provision for credit losses 1 955 22 1 603 Operating expenses 12 587 27 9 940 Operating profit 7 426 29 5 769 Taxation
Slide 6: Headline earnings mix
Headline earnings mix Property Finance Business Banking 3% 12% SCMB (3%) (10%) 25% Stanbic Africa (22%) 10% (7%) Liberty 6% (10%) InternationalOperations 8% STANLIB (14%) 1% Retail Banking (1%) 35% (33%) ( ) Dec 2001 6
Slide 7: Headline earnings breakdown
Headline earnings breakdown Dec ’02 % change Dec ’01 Rm Rm Domestic Banking 3 960 33 2 971 Retail Banking 1 796 25 1 441 SCMB 1 301 36 955 Business Banking 635 38 461 Property Finance 166 32 126 Central services 62 (12) Stanbic Africa 482 48 325 International Operations 429 (34) 648 STANLIB 62 (24)
Slide 8: Analysis of the translation effect
Analysis of the translation effect 20 ZAR/GBP 15 10 Jan Feb March April May June July Aug Sep Oct Nov Dec 2001 2002 •Rand weaker for most of 2002 •Accounting treatment – movements taken to reserves •Impact for the year – R3.3bn reversal 8
Slide 9: Summarised balance sheet
Summarised balance sheet Dec ’02 % Dec ’01 Rbn change Rbn Cash and short-term funds 45.4 8 42.2 Advances 170.4 5 162.0 Other assets 88.1 (14) 102.0 Total banking assets 303.9 (1) 306.2 Liberty 85.8 (4) 89.0 Total assets 389.7 (1) 395.2 Shareholders’ funds 26.1 1 25.7 Minorities 6.0 - 6.0 Deposits 23
Slide 10: Headline return on equity
Headline return on equity 32000 24 21 27000 18 22000 15 Rm 17000 12 % 9 12000 6 7000 3 2000 0 1996 1997 1998 1999 2000 2001 2002 Shareholders' funds Headline ROE 10
Slide 11: Returns on equity
Returns on equity Dec ’02 Dec ’01 ROE ROE % % Domestic Banking 31.2 27.0 Retail Banking 31.7 26.9 SCMB 28.0 26.8 Business Banking 35.2 30.4 Property Finance 28.5 22.3 Stanbic Africa 27.4 21.4 International Operations 6.3 10.9 STANLIB 23.9 54.7 Central funding and Liberty Group 7.6 11.6 Standard Bank
Slide 12: The group funds margin analysis
The group funds margin analysis Average funds margin December 2001 3.31 Domestic operations Average prime interest rate 0.07 2001:13.85% 2002:15.6% Higher branch deposits and endowment effect 0.40 Growth in low margin wholesale money market assets (0.25) Lending margin (0.08) Stanbic Africa 0.02 Int
Slide 13: Non-interest revenue
Non-interest revenue •Fees & commission +24% 100% • Increased volumes & 10 12 repricing across Domestic 80% Banking 28 25 • Africa – inclusion of Uganda 60% & Malawi • International – Project & 40% Mining Finance 62 63 •Trading +42% 20% • Domestic +47% - commodities, forex, interest 0% rate derivati
Slide 14: Provision for credit losses
Provision for credit losses 2,500 1.6 1.4 2,000 1.2 1,500 1 Rm 1,000 0.8 % 0.6 500 0.4 0 0.2 -500 0 1999 2000 2001 2002 Domestic International Africa Credit loss ratio 14
Slide 15: Non-performing loans
Non-performing loans % of average advances Dec Dec Dec Dec ’02 ’01 ’02 ’01 Rm Rm % % Gross NPLs 4 808 5 085 2.9 3.5 Net NPLs before 4 78 0.0 0.0 GDP Net NPLs after (1 549) (1 413) (0.9) (1.0) GDP Coverage: Gross 70% 65% Coverage: Net 184% 174% 15
Slide 16: Cost-to-income ratios
Cost-to-income ratios Dec ’02 Dec ’01 % % Domestic Banking 53.4 55.9 Retail Banking 62.2 64.5 SCMB 49.6 52.8 Business Banking 36.2 39.0 Property Finance 28.9 26.8 Stanbic Africa 60.8 58.3 International Operations 71.4 63.8 Standard Bank operations 57.3 57.4 16
Slide 17: Capital adequacy
Capital adequacy 16 • Banking capital adequacy 14 13.8% (Dec 2001: 13.5%) 12 10 • Capital adequacy including 8 Liberty 14.3% (Dec 2001: 6 14.2%) 4 • R1bn tertiary capital issued in 2 0 June 2002 1998 1999 2000 2001 2002 • Aggregate regulatory Primary capital Secondary capital requirement 10.6% (Dec
Slide 18: Taxation
Taxation 2002 2001 Standard Bank operations total 33.5 30.8 effective tax rate (%) Standard Bank operations direct 28.2 25.3 effective tax rate (%) Cash tax paid by SBSA (Rm) (2 273) (526) • Reversal of gold book timing differences • Prudent approach to tax risk 18
Slide 19: Other financial issues
Other financial issues • AC133 • Retirement funding • Product vs geographic reporting 19
Slide 20: Retail Banking
Retail Banking Standard Bank | jf Group
Slide 21: Highlights
Highlights • Built a unified sales and service culture • Integrated sales, service and marketing programs delivering sustainable results • Improvement in market share across key products • Quality of book improved for 3rd consecutive year 21
Slide 22: Record year for home loans
Record year for home loans • Registrations up 48% to R16.6bn • Retail mortgage book (excl. Property and Business Banking) grew from R39bn to R48bn • New business market share consistently above 20% • Highest SA total mortgage balance growth over last four months • PIP’s decreased from 4 200 to 2 600
Slide 23: Successful credit card growth
Successful credit card growth • Market share growth from 21% to 25% • 26% growth in debtors • Record card openings - 164 000 (2001: 63 000) • NPL’s reduced from 1.52% to 0.93% of book • 27.5% fee growth due to buoyant consumer spending and customer growth • EDS integration on track for June 2003 23
Slide 24: Mass market – demonstrating potential
Mass market – demonstrating potential • Active E-Plan accounts grew from 2.2m to 2.5m • Transaction balances up 19.8% • AutoBank E’s increased from 120 to 130 • Processes significantly improved • Total ABIL JV balance at R256m 24
Slide 25: Good balance and volume growth
Good balance and volume growth • Current Account and Savings balances up 16.8% to R19bn • Investment balances grown by 17.8% to R32bn • Endowment effect boosted Retail’s margin • Fee income up by 15% • Improved focus on personal middle income market • Successful account opening campaign • Simplifica
Slide 26: Branch lending - growth with improved quality
Branch lending - growth with improved quality • Balance growth of 7.2% • Personal up by 10% • Agriculture up by 12% • SME flat • NPL’s reduced from R783m to R577m • Provision adequacy target of 59% achieved (2001: 35%) • Margin above prime improved by 18bp due to adoption of customer risk based pric
Slide 27: Bancassurance continues to work
Bancassurance continues to work Overall pre-tax profit up by 35% to R350m Embedded • Penetration of our customer base continues to increase 2002: 22% (2001: 21%) Complex • First year commission up 16% • Liberty winning increasing proportion of new business • Expansion of consultancy force to concent
Slide 28: Service continues to improve
Service continues to improve • Continuous improvement in customer service ratings • Customer complaints reduced by 30% • Impact of robberies reduced by 47% • Branches increased from 674 to 682 • Internet banking customers at 228 000 (2001: 203 000) • Internet transactions grew by 54% • Internet resp
Slide 29: Improve service and market share in 2003
Improve service and market share in 2003 • Continue initiatives to become customer service leader • Continue trend in market share increases • Grow share of the middle market segment • Expand our mass market distribution and product offering • Improve branch and support processes 29
Slide 30: SCMB
Standard Bank | ji Group
Slide 31: Continued success in 2002
Continued success in 2002 • Strong revenue growth with good performances from core businesses • Integration of SCMB and International Operations • Creation of STANLIB • Strong credit processes • Improved provision coverage 31
Slide 32: Good revenue growth from all businesses
Good revenue growth from all businesses 1400 1200 +7% 1000 +70% +51% 800 Rm 600 +4% 400 +13% 200 +22% +26% 0 Treasury Corporate and Project and Foreign Custody Electronic Other Investment Structured Banking Banking Banking Finance 2002 2001 32
Slide 33: Diversified income streams
Diversified income streams 100% 50% 0% 1999 2000 2001 2002 Interest income Trading income Other income 33
Slide 34: SCMB/International integration
SCMB/International integration Mining deals Corporate Finance Advisory (SCMB & International) Fee Income Underwriting / Arranging Project Finance (Risk) (Structuring) (SCMB & International) Corporate Banking Bridging Finance (SCMB & International) Term Facility (amortising) Margin Bullet Project Fin
Slide 35: SCMB / International / Africa Integration
SCMB / International / Africa Integration Vodacom Tanzania - Euromoney Africa Deal of 2002 Project Finance Advisory Advised / Arranged (SCMB & International) Fee Income Project Finance Export Credit Facility (SCMB) Margin Local Syndication with Corporate Banking Development Finance Institutions (Int
Slide 36: SCMB / International / Africa Integration
SCMB / International / Africa Integration MTN – Demonstrating relationships working Project Finance Guarantees / LC’s / Bid Bonds (SCMB) Fee Income Stanbic Nigeria Africa Banking (Stanbic Africa) Retail Transactional Banking (SBSA) Electronic Banking SCMB Corporate Banking Relationship Managers (SCM
Slide 37: Build and integrate in 2003
Build and integrate in 2003 • Maintain market share and positioning in core operations • Strongly exploit efficiencies inherent in the integration of international treasury operations • Grow our leadership in provision of electronic business solutions in South Africa • Focus on cost containment • Tr
Slide 38: Business Banking
Business Banking Standard Bank | jf Group
Slide 39: Strong growth in 2002
Strong growth in 2002 • Deposit growth 34% • Stannic asset growth 20% • Lower provisions in Stannic • Fee income grown across the board, up 17% 39
Slide 40: Deposit growth
Deposit growth 25,000 20,000 15,000 Rm 10,000 5,000 0 1998 1999 2000 2001 2002 Deposit balances 40
Slide 41: The Stannic turnaround
The Stannic turnaround 1998 1999 2000 2001 2002 Costs (Rm) 610.6 574.0 492.9 437.3 489.2 NPBT (Rm) 37.5 135.0 226.2 313.4 498.2 Bad debts (Rm) 288.8 266.8 194.9 151.9 149.2 Cost-to-income (%) 65 59 54 48 43 ROE pre tax (%) 3 12 20 26 26 Bad debt book (%) 1.65 1.60 1.18 0.89 0.69 Market share (%) 21.
Slide 42: Business Banking restructure
Business Banking restructure • Large corporate client segment to SCMB • Small to medium business client segment to Retail Banking • Stannic to continue as a product based division, profits split between Retail and SCMB 42
Slide 43: Benefits of Business Banking restructure
Benefits of Business Banking restructure • Optimum structure for customer focus - two banking divisions: Retail and Corporate • Business Banking will be merged into these two divisions • Cost cutting not the driver • Stannic will continue to operate independently linking into both Retail and Corpora
Slide 44: Stanbic Africa
Stanbic Africa Standard Bank | jf Group
Slide 45: 2002 Results review
2002 Results review • Good performances across most businesses • Broader portfolio of banks creating sustainable earnings growth • New management in Botswana, Ghana, Nigeria and Swaziland delivered results • Zimbabwe performed well in local currency, but NAV written down to zero • Kenya made a posit
Slide 46: Integration with the group delivering benefits
Integration with the group delivering benefits • Treasury focus is enhancing revenue • Retail Africa gaining momentum • Banking technology upgrade ahead of schedule • Quality of risk management enhanced • Active capital management improved returns 46
Slide 47: Acquisition successes
Acquisition successes • Acquisitions in Malawi and Uganda • Both are performing ahead of expectations • Integration of the operations is progressing well • Risk management disciplines are in place 47
Slide 48: Progress since 1998
Progress since 1998 1998 2001 2002 Representation (# of countries) 14 17 17 Capital (Rm) 830 1 926 1 592 Headline earnings (Rm) 196 325 482 Dividends received (Rm) 121 326 522 48
Slide 49: Further expansion in 2003
Further expansion in 2003 • Develop an African customer focused wholesale banking offering working with SCMB and SBL • Increased intensity of Retail Banking rollout in selected markets • De-emphasise geographic reporting and move towards a focus on product delivery and customer interface • Improve t
Slide 50: Stanbic Uganda head office branch
Stanbic Uganda head office branch 50
Slide 51: One of the branches in Malawi
One of the branches in Malawi 51
Slide 52: Innovation in Kampala – not the sole preserve of bankers!
Innovation in Kampala – not the sole preserve of bankers! 52
Slide 53: International Operations
International Operations Standard Bank | jf Group
Slide 54: Tough global markets
Tough global markets • International operations were affected by • Increasing volatility in asset prices • Deepening corporate credit pressures • Latin American instability 54
Slide 55: Revenues net of provisions down by 5%
Revenues net of provisions down by 5% 60 50 40 £m 30 20 10 0 Capital Markets Resource Treasury Trade Finance Advisory Private client Own Funds & Banking & Banking services & fund Other management 2002 2001 55
Slide 56: Debt capital markets show mixed results
Debt capital markets show mixed results • Customer businesses impacted by weaker markets • Origination and syndications - strong performance in Eastern Europe offset by poor performance in Latin America • Sales/trading revenues in line with 2001 • Proprietary trading performed strongly, aided by mar
Slide 57: Resource Banking the flagship
Resource Banking the flagship • Successful year for both earnings and business development • Record performances from precious metals trading and financing businesses • Base metals recorded solid performance, despite depressed prices and low market activity • Mining finance reputation well establish
Slide 58: Private client services & fund management continue to grow
Private client services & fund management continue to grow • Third party assets up by 58% • Energy, Infrastructure and Resources Funds Group formally established • Offshore Private Banking impacted by weak equity markets 58
Slide 59: Deals
August 2002 US$ 200,000,000 Syndicated Term Loan Facility MANDATED ARRANGER AND BOOKRUNNER Standard Bank London March 2002 Empresa de Telecomunicaciones de Bogota S.A. E.S.P. Colombia US$ 95,000,000 Syndicated Term Loan Facility SOLE MANDATED ARRANGER AND ADMINISTRATIVE AGENT Standard Bank London Oc
Slide 60: Deals
May 2002 y NN NORILSK NICKEL US$ 200,000,000 Syndicated Trade Finance Facility MANDATED ARRANGER, UNDERWRITER AND COLLATERAL AGENT Standard Bank London August 2002 RUS AJ) Russian Aluminium US$ 110,000,000 Syndicated Trade Finance Facility MANDATED JOINT ARRANGER AND HEDGE PROVIDER Standard Bank Lon
Slide 61: Provisioning adequacy
Provisioning adequacy • Provisioning charge of £30.9m (2001: £14.9m) reflects extremely difficult credit markets • Level of GDP maintained at 1.4% of risk weighted banking portfolio • Liquidity and structural provisions against trading book and longer-term transactions 61
Slide 62: Accelerated integration in 2003
Accelerated integration in 2003 • Cautiously optimistic, recognising state of global economy • Continued focus on customer activities • Upgrade Brazil and Russia to fully licensed investment banks • Further benefits from full integration of Asian operations • Management changes and restructuring ben
Slide 63: Conclusion
Conclusion Standard Bank | jf Group
Slide 64: Awards received in 2002
Awards received in 2002 • Euromoney - South Africa’s best bank • Global Finance - best bank in South Africa and Africa • PricewaterhouseCoopers - the bank most other banks in South Africa respect most highly • The Banker - Africa’s Bank of the Year • Risk magazine Global Derivatives Rankings - first
Slide 65: Standard Bank Group transformation
Standard Bank Group transformation AIC 2002 2001 % % Managerial staff ABSA 10 7 FirstRand 24 18 Nedcor n/a 21 Standard Bank 28 23 Total staff ABSA 35 33 FirstRand 50 50 Nedcor n/a 51 Standard Bank 64 55 Source: annual reports 65
Slide 66: Risk management
Risk management • Group’s approach is maturing • Fraud, money laundering • Tax • Multiple jurisdictions • Disaster recovery 66
Slide 67: Group priorities for 2003
Group priorities for 2003 • Retail Banking • Mass market • African retail expansion • Doing things Simpler. Better. Faster. • Bancassurance • Wholesale Banking • Client focus • Closer integration of Stanbic Africa, SCMB and International Operations • Performance of International Operations 67
Slide 68: Group priorities for 2003
Group priorities for 2003 • Africa • Acquisitions • Capital management • Financial Services Charter 68
Slide 69: Standard Bank Group
Standard Bank Group Retail Life Wealth Wholesale Banking Assurer Banking •South Africa •South Africa • Selected African •Selected countries emerging markets 30% 65% 100% 100% 69
Slide 70: Standard Bank Group
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