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SBK - Standard Bank Group - Audited results and dividend announcement
For the year ended 31 December 2007
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
JSE Share code: SBK
NSX Share code: SNB
ISIN: ZAE000109815
Audited results and dividend announcement
For the year ended 31 December 2007
For Standard Bank, 2007 was a momentous year in which we:
weathered global financial market stresses not seen in the last decade;
finalised acquisitions in the important emerging markets of Argentina, Turkey
and Nigeria;
negotiated and gained the necessary approvals for the historic transaction
between Standard Bank and ICBC which resulted in us gaining a valuable
strategic partner and a significant injection of tier one capital in a cost
effective manner; and
achieved financial results that met our published objectives for growth in
headline earnings per share and return on equity.
Overview of financial results
Operating conditions in local and international markets in the second half of
the year contrasted starkly with the more favourable conditions in the six
months to June 2007. Despite the worsening environment, Standard Bank Group
continued to perform strongly, building on the excellent financial results
achieved in the first half of the year. For the full year to 31 December 2007,
headline earnings per share grew by 23,4% to 1 033,4 cents per share and the
group achieved a return on equity of 26,7% on an IFRS basis.
Key financial highlights:
Normalised Objectives IFRS
Unaudited 2007(1) Audited
Return on equity (%) 24,8 24,0 26,7
Headline earnings growth (%) 22 25
Headline earnings per share (cents) 960,6 1 033,4
Headline earnings per share growth (%) 21 16,5(2) 23
Cost-to-income ratio(3) (%) 52,0 =53,5 52,4
Credit loss ratio (%) 0,78 <0,75 0,79
1 Based on normalised results.
2 10% above average South African inflation (CPIX) of 6,5%.
3 Excluding profit on the sale of the remaining shares in MasterCard.
On a normalised basis, headline earnings per share grew by 20,6% and a return
on equity of 24,8% was achieved. Normalised results, fully explained in a
separate section in this announcement, adjust the IFRS results for two
accounting anomalies that have distorted the results from an economic
perspective with effect from 2004. The commentary that follows is based on
the normalised results.
The global economy continued to expand rapidly in the first half of 2007, with
growth exceeding 5%. In the second half of the year concerns about the US sub-
prime market intensified, credit repriced sharply and liquidity contracted.
The impact was pervasive, affecting high-yield corporate debt, asset-backed
commercial paper, funding and capital markets.
South Africa weathered the credit market turmoil relatively well, but high oil
and food prices took their toll. CPIX inflation breached the upper limit of the
target range early in the second quarter of the year, and has stayed above the
target ever since. This prompted the South African Reserve Bank to raise
interest rates by a further 200 basis points over the year. Interest rates in
South Africa are now 400 basis points higher than in June 2006. Of concern is
the ratio of household debt to disposable income which reached 77,4% in the
third quarter of 2007. Higher interest rates and household debt levels indicate
heightened credit risk in South Africa, reflected in the higher levels of
credit provisioning in the bank`s results. Retail sales, vehicle sales and
house prices, although buoyant for much of the year, finally succumbed to the
impact of higher interest rates and stagnated towards the end of the year.
The group`s strategy of building revenue streams in other emerging markets
started to show results in 2007. While the growth contribution to headline
earnings from the South African operations slowed to 15%, the businesses in the
rest of Africa grew their contribution by 58% and operations outside Africa by
98%. South Africa remains the group`s primary operating market, accounting for
82% of the total R13 billion in headline earnings for 2007 (2006: 87% of
R11 billion).
Analysing the results by global business line, which is more reflective of the
way the group`s businesses are managed, Corporate & Investment Banking had an
excellent year, growing headline earnings by 34%, while Personal & Business
Banking grew by a more subdued 18%. Liberty Life (now incorporating 100% of
Stanlib) grew its contribution to headline earnings by 15%.
Banking activities income statement analysis
Net interest income
Growth of 35% was achieved in net interest income 39% in Personal & Business
Banking and 33% in Corporate & Investment Banking. The strong increase in net
interest income was driven by 26% growth in average assets across the group`s
banking operations together with wider net interest margins.
The net interest margin improved 19 basis points to 2,97%, due largely to the
endowment impact of higher interest rates on shareholders` funds and
transactional deposits. This was offset by a continued reliance on more
expensive wholesale funding to support strong growth in Personal & Business
Banking lending, increased competition for term funding and higher central bank
reserving costs.
Non-interest revenue
Net fee and commission revenue grew by 23%. The largest category, account
transaction fees, grew 10% despite sub-inflation price increases in South
Africa. A highlight was the 75% growth in knowledge based fee income, driven by
advisory fees emanating from strong investment banking deal flow. Card based
commissions grew by 16% as transactional turnover increased and customer
numbers grew by 2%. Commission revenue in short-term insurance operations
grew by 28% on the back of increased policy sales across the branch network.
Trading revenue grew by 49%, benefiting from increased client deal flow in
volatile foreign exchange and interest rate markets. Foreign exchange trading
revenues grew strongly across the group, particularly in the rest of Africa.
Debt capital markets showed excellent results in the first half of the year
and, given the extreme conditions in global credit markets, the second half
presented fewer opportunities to generate revenue as the level of client
activity slowed. Commodity trading outside Africa grew strongly off increased
deal flow in the energy, base and precious metals sectors.
Growth in other revenue of 21% originated mainly from the profit of
R459 million (2006: R157 million) realised on the sale of the remaining portion
of the group`s shares in MasterCard. The profit is excluded from headline
earnings as it relates to realised gains transferred out of equity on a
financial asset defined under IFRS as "available-for-sale". Property related
revenue decreased due to the non-recurrence of substantial gains on property
investments and lower dividends received from investments.
Credit impairment charges
The 68% increase in the group`s credit impairment charge, to R4,6 billion,
comprises an 86% increase in impairment charges for non-performing loans and
a 16% increase in portfolio based provisions for performing loans. In Personal
& Business Banking the total charge increased by 82% while in Corporate &
Investment Banking the charge reduced from last year. The group`s credit loss
ratio increased to 0,78% from 0,60%, slightly outside the group`s objective of
0,75% for this indicator.
In Personal & Business Banking, the largest increase in impairment charges came
in the mortgage business. Higher inflation and interest rates contributed to a
129% increase in non-performing mortgage loans, resulting in a 171% higher
income statement charge for this product. The credit loss ratio for mortgages
is 0,54% (2006: 0,27%).
In instalment sale and finance leases, the weaker economic conditions and
growth in higher risk dealer originated business increased non-performing
loans by 116%. Recovery values in the used passenger market have also
deteriorated and indications of increased defaults in the business portfolio
are being monitored. Credit impairment charges have increased by 90% and the
credit loss ratio in this product is 1,49% (2006: 1,09%).
Credit card customers felt the pinch of rising inflation on disposable income
and non-performing loans increased by 46%. Credit impairment charges
increased by 48% and the credit loss ratio in this product is 7,20% (2006:
7,03%), well within the group`s previous guidance of 7% to 9% through an
economic cycle.
The credit loss ratio in Corporate & Investment Banking improved to 0,09%
(2006: 0,15%), mainly as a result of doubtful debt rehabilitations in the
property finance portfolio.
Operating expenses
Operating expenses increased by 29%, comprising 32% growth in staff costs and
26% in other operating expenses. Excluding recent acquisitions, cost growth
amounted to 23% in total, and 26% and 18% in staff costs and other operating
expenses respectively. The cost-to-income ratio improved from 52,7% to 52,0%
(excluding the capital gain realised on the disposal of MasterCard shares) and
the "jaws gap" (income growth less cost growth) remained positive at 2,4%
(2006: 6,1%).
The increase in staff costs was driven by a 17% larger staff complement as the
group built scale and upskilled management in key markets. Incentive pay
provisions increased in line with business performance. The incentive-based
remuneration component of total staff costs increased from 31% to 34%,
reflecting improved flexibility in staff costs.
The increase in other operating expenses was largely attributable to higher
levels of business activity and continued expansion. The group`s largest cost
component besides staff costs was information technology, which grew by 24%
largely as a result of investments in systems development for compliance and
risk related projects, increased maintenance costs, higher ATM network and data
line expenses.
Balance sheet analysis
Loans and advances grew by 28% in the year, 3% of which related to
acquisitions. Organic growth of 25% was achieved in Personal & Business Banking
and 26% in Corporate & Investment Banking.
Activity in the Personal & Business Banking market segment remained buoyant for
most of the year but towards the end of the year the impact of higher interest
rates started to dampen the strong growth momentum built up in recent years.
Mortgage loans grew by 29% with growth of 9% in the average value of new
registrations, a decline in cancellations and prepayments and increased use of
access bond facilities. Further advances on existing mortgages represented 17%
(2006: 18%) of total new business. Instalment sale and finance leases grew by
22% excluding loans acquired with the acquisition of BankBoston in Argentina,
due to a strong increase in dealer originated new vehicle business. The motor
to non-motor ratio of this book is 58:42 (2006: 61:39).
Card debtors increased by 31%, demonstrating slower growth than in previous
years as credit granting criteria were tightened. Overdrafts and other demand
loans grew by 22% due to the growth in the number of personal and business
current accounts as well as increased utilisation of existing facilities.
Corporate & Investment Banking grew loans and advances by 26%, excluding loans
consolidated through acquisitions. Loans granted to customers grew by 40%,
driven by new product offerings, a general increase in customer demand and a
number of specialised finance and energy finance transactions outside Africa.
Structured finance transactions in the rest of Africa and other corporate
lending transactions in South Africa also contributed to this growth.
Infrastructure financing is gaining momentum, with progress made during the
year on several toll road, port and airport mandates across Africa.
The group`s liquidity position remains healthy and short-term marketable
assets exceeded the minimum prudential requirements by R60 billion at year end.
The structural liquidity mismatch position continues to be closely monitored
and the group`s long-term funding ratio was increased to 17,8% from 15,5% in the
prior year.
Capital and Basel II
The implementation of Basel II on 1 January 2008 has provided the group with an
internationally recognised framework incorporating best practice in capital and
risk management. The capability that this implementation has developed in the
way the group manages its business is recognised and welcomed. The group has
invested significant resources over the past seven years in developing the
systems and processes to support Basel II and related risk management
processes. Over the last year, the group significantly enhanced its internal
economic capital and stress testing methodologies. The South African
regulator`s approval of the group`s target approaches of AIRB (advanced
internal rating based approach) for credit risk, TSA (the standardised
approach) for operational risk and internal models for market risk, was an
important milestone in validating these efforts.
The conversion from Basel I to Basel II has led to increased risk-weighted
exposures and lower qualifying capital, resulting in lower capital adequacy
ratios. As expected, lower exposures in Personal & Business Banking were offset
by higher risk-weighted exposures in Corporate & Investment Banking portfolios
and the addition of operational risk which was not measured under Basel I. The
pro-forma impact of conversion to Basel II is illustrated below.
2007 2007
Pro-forma
Basel I Basel II
Rbn Rbn
Risk-weighted exposures
Credit risk 461 465
Trading/market risk 63 54
Operational risk 56
Total 524 575
Qualifying capital 76 65
Group capital adequacy ratios
Tier I (%) 10,4 8,5
Total (%) 14,4 11,3
The group issued USD85 million, Euro100 million and R300 million in Tier III
capital, and USD355 million in Tier II capital. The group also refinanced part
of its Tutuwa BEE structure, releasing R1 billion in regulatory Tier I capital.
Subordinated debt to the value of R882 million was redeemed during the year.
Distributions to shareholders
The group`s policy to declare both interim and year-end distributions at a
cover ratio of 2,5 times normalised headline earnings remains unchanged. A
final dividend of 205 cents per share (2006: 176 cents) has been declared,
an increase of 16% on last year`s final dividend. The total amount
distributed to shareholders in respect of the 2007 financial year was 21%
higher than in the prior year.
Financial Sector Charter
Standard Bank remains committed to the principles of the Financial Sector
Charter (charter). The bank concurs with the need to harmonise the charter and
the Broad-based Black Economic Empowerment Codes of Good Practice legislated in
2007, and is working hard to achieve this without losing certain sector
specific targets agreed to in the charter which are of significant national
importance. The harmonisation process continues.
The bank`s most pleasing achievement in relation to charter targets has been in
the area of employment equity. Black managers comprised 49% of Standard Bank
management in South Africa at the end of 2007.
Major acquisitions concluded in 2007
BankBoston in Argentina
The group obtained approval from both South African and Argentine regulators
for its acquisition of the assets and liabilities of BankBoston Argentina,
with effect from 1 April 2007. The transaction resulted in negative goodwill of
R382 million which was accounted for as a gain in the income statement, but
excluded from headline earnings. The incorporation of this entity into the
group has progressed well with minimal disruption and it contributed
R129 million to the group`s headline earnings and R511 million to earnings.
IBTC Chartered Bank Plc (IBTC) in Nigeria
Regulatory approval was granted to the group on 24 September 2007 to obtain a
controlling interest in IBTC through the sale of its Nigerian operations,
Stanbic Bank (Nigeria) Limited, to IBTC in exchange for a 33,3% share in the
combined entity, and Standard Bank`s acquisition of a further 16,8% of the
enlarged entity for R2,8 billion. IBTC has been consolidated with effect from
1 October 2007 and added R67 million to the group`s earnings in the three months
to 31 December 2007. The transaction resulted in goodwill and intangible
assets, based on preliminary purchase price allocation, of R3,0 billion being
recognised, and a gain of R534 million on the partial disposal of Stanbic Bank
(Nigeria) Limited which has been accounted for directly in equity. The
valuation of the intangible assets as part of the purchase price allocation is
in progress. The integration of IBTC is well underway.
Acquisition of CFC Bank in Kenya
The group has concluded an agreement with CFC Bank to dispose of its
shareholding in Stanbic Bank Kenya to CFC Bank in exchange for a 41,4% share in
the merged bank, and to simultaneously acquire further shares worth
approximately USD90 million to ensure a controlling interest of 60% therein.
This transaction is still subject to regulatory approvals and is unlikely to
have a significant impact on group results. If approved, It will expand the
group`s African network and create a stronger presence in East Africa.
Strategic partnership with Industrial and Commercial Bank of China (ICBC)
The strategic partnership between Standard Bank Group and ICBC, pursuant to
which ICBC became a supportive, non-controlling 20% minority shareholder in
Standard Bank Group, was announced on 25 October 2007. The key features of the
deal are the issue of 152,5 million new ordinary shares to ICBC at R104,58 per
share and the acquisition by ICBC of 152,5 million ordinary shares from
existing shareholders at R136,00 per share, for a total consideration of
R36,7 billion.
The two transactions were approved by the shareholders of both Standard Bank
and ICBC at general meetings held on 3 December 2007 and 13 December 2007
respectively, with 97% of Standard Bank shareholders voting in favour of the
transaction. The last of the conditions precedent to the transaction was
fulfilled on 14 February 2008. The operative date of the scheme was 3 March
2008, on which date the scheme consideration was paid into shareholders`
accounts, share balances updated and new shares issued. The first strategic co-
operation committee meeting, jointly chaired by Jacko Maree and President of
ICBC, Yang Kaisheng, is scheduled to take place during March in Beijing.
In addition to the co-operation benefits that the transaction provides,
Standard Bank has raised new capital required to continue growing its franchise
in its chosen markets at a time when bank capital has become a very scarce
resource.
This transaction is expected to affect the group`s results as follows: revenue
benefits of approximately USD50 million are expected to arise from the business
co-operation agreements in the first year of co-operation, and by the third
year of co-operation, the annual revenue benefits are expected to amount to
approximately USD180 million. For 2008, return on equity is expected to be
diluted, given that the new equity capital will take time to employ and growth
in headline earnings per share is expected to be slower as a result of the
dilutive impact of the new shares in issue and the relatively low initial
return on ungeared capital. The group`s longer-term growth prospects are
however substantially enhanced.
Prospects
The outlook for global economic growth has deteriorated significantly in the
past six months. Dislocations in developed financial markets have inevitably
had a knock-on effect in developing markets and South Africa has not been
immune. Growth rates in the markets in which we operate are expected to slow in
2008. Operating conditions will however create both risks and opportunities
across the group`s diverse financial services operations. The board is
confident that with our skilled and passionate people, and highly disciplined
approach to risk management, the group is well positioned to manage these risks
and capitalise on the opportunities.
Over the next few years the group will focus on identifying suitable capital
deployment opportunities for the capital inflow arising from the transaction
with ICBC to ensure appropriate shareholder returns.
The group`s medium-term financial objectives remain unchanged: a normalised
return on equity of 22,5%, and normalised headline earnings per share growth of
average South African inflation (CPIX) plus 10 percentage points. In 2008,
returns are anticipated to be slightly reduced by the prevailing economic
conditions but more significantly impacted by the short-term financial effects
of the ICBC transaction. Consequently, the group`s financial objectives for the
year ahead have been revised downwards to 21% for normalised return on equity
and to average South African inflation (CPIX) plus 5 percentage points for
growth in normalised headline earnings per share.
Jacko Maree Derek Cooper
Chief executive Chairman
Johannesburg
4 March 2008
Normalised results (Unaudited)
With effect from 2004, the group has adjusted its results reported under
International Financial Reporting Standards (IFRS) for two required accounting
conventions that do not reflect the underlying economic substance of the
transactions. Consistent with prior years, the IFRS results have been adjusted
for the following items to arrive at the normalised results:
preference share funding for the group`s Black Economic Empowerment Ownership
initiative (Tutuwa) transaction that is deducted from equity and reduces the
shares in terms of IFRS; and
group company shares held for the benefit of Liberty Life policyholders that
result in a reduction in the number of shares and the exclusion of fair value
adjustments and distributions on these shares. The IFRS treatment causes an
accounting mismatch between income from investments and changes in
policyholders` liabilities.
On 20 December 2007 the group entered into a financing arrangement that
effectively externalised R1 billion of the preference share financing provided
in terms of the group`s Tutuwa initiative. This transaction resulted in the
release of 24,7 million shares previously deemed by IFRS to be "treasury
shares". As the transaction took place close to the end of the financial period
the impact on the weighted average number of shares was insignificant.
The result of these adjustments is as follows:
Normalised headline earnings
for the year ended 31 December 2007
Weighted
average number Headline Growth on
of shares earnings 2006
`000 Rm %
Disclosed on an IFRS basis 1 230 961 12 721 25
Tutuwa initiative 98 378 358
Group shares held for the
benefit of Liberty
Life policyholders 39 884 74
Normalised 1 369 223 13 153 22
Normalised financial statistics
for the year ended 31 December
%
change 2007 2006
Standard Bank Group
Number of ordinary shares in issue (000`s)
end of period 1 372 597 1 362 633
weighted average 1 369 223 1 358 415
diluted weighted average 1 388 217 1 380 416
Cents per ordinary share
Headline earnings 21 960,6 796,4
Diluted headline earnings 21 947,5 783,7
Total distributions 21 386,0 320,0
Earnings 25 1 028,5 820,7
Diluted earnings 26 1 014,5 807,6
Net asset value 20 4 255 3 548
Financial performance (%)
ROE 24,8 25,4
Net interest margin 2,97 2,78
Credit loss ratio 0,78 0,60
Cost-to-income ratio 51,6 52,5
Cost-to-income ratio excluding capital
profit on MasterCard 52,0 52,7
Normalised headline earnings contribution by business unit for the year
ended 31 December
%
Rm change 2007 2006
Personal & Business Banking 18 5 661 4 816
Corporate & Investment Banking 34 6 765 5 033
Central and other (>100) (246) 126
Central and other IFRS (572) (208)
Tutuwa adjustments (2) 326 334
Banking activities 22 12 180 9 975
Liberty Life 15 973 843
Liberty Life IFRS 59 867 547
Policyholders` deemed treasury shares
and Tutuwa adjustment (64) 106 296
Standard Bank Group 22 13 153 10 818
Standard Bank Group results for the year ended 31 December 2007
Abridged audited results prepared in accordance with IFRS
Consolidated income statement
for the year ended 31 December
%
Rm change 2007 2006
Income from banking activities 32 47 296 35 819
Net interest income 35 22 549 16 654
Non-interest revenue 29 24 747 19 165
Income from investment management
and life insurance activities (16) 49 834 59 344
Total income 2 97 130 95 163
Credit impairment charges 68 4 590 2 733
Benefits due to policyholders (22) 37 153 47 896
Income after credit impairment charges
and policyholders` benefits 24 55 387 44 534
Operating expenses in banking activities 29 24 706 19 105
Operating expenses in investment management
and life insurance activities 14 7 423 6 486
Net income before goodwill 23 23 258 18 943
Goodwill (gain)/impairment (>100) (376) 15
Net income before associates and
joint ventures 25 23 634 18 928
Share of profit from associates and joint
ventures 29 355 275
Net income before indirect taxation 25 23 989 19 203
Indirect taxation 41 1 185 841
Profit before direct taxation 24 22 804 18 362
Direct taxation 6 6 232 5 852
Profit for the year 32 16 572 12 510
Attributable to minorities 43 2 471 1 723
Attributable to preference shareholders 67 450 269
Attributable to ordinary shareholders 30 13 651 10 518
Basic earnings per share (cents) 28 1 109,0 864,5
Diluted earnings per share (cents) 27 1 044,1 820,1
Headline earnings
for the year ended 31 December
Rm %
change 2007 2006
Group profit attributable to ordinary
shareholders 30 13 651 10 518
Headline earnings adjustable items
added back or reversed(1) (966) (601)
Goodwill (gain)/impairment IFRS 3 (376) 15
Profit on sale of property and equipment IAS 16 (61) (53)
Impairment of property and equipment IAS 16 10 9
Gains on disposal of businesses and
divisions IAS 27 (6) (374)
Impairment of intangibles IAS 38 26 -
Investment gains on available-for-sale
assets IAS 39 (559) (198)
Taxation on headline earnings adjustable items 32 14
Minority share of headline earnings
adjustable items 4 257
Headline earnings 25 12 721 10 188
1 These headline earnings adjustable items have been included in the
calculation of normalised headline earnings disclosed above.
Segment report
for the year ended 31 December
Revenue contribution by business unit
%
Rm change 2007 2006
Personal & Business Banking 29 27 075 20 911
Corporate & Investment Banking 37 19 756 14 452
Central and other 1 812 803
Banking activities 32 47 643 36 166
Liberty Life (17) 50 320 60 410
Standard Bank Group Normalised 1 97 963 96 576
Adjustments for IFRS (41) (833) (1 413)
Standard Bank Group IFRS 2 97 130 95 163
Profit and loss attributable to ordinary
shareholders
Personal & Business Banking 18 5 710 4 844
Corporate & Investment Banking 35 6 805 5 029
Central and other 88 593 315
Banking activities 29 13 108 10 188
Liberty Life 2 975 960
Standard Bank Group Normalised 26 14 083 11 148
Adjustments for IFRS (31) (432) (630)
Standard Bank Group IFRS 30 13 651 10 518
Statement of changes in equity
for the year ended 31 December
Preference
Ordinary share
share capital
holders` and Minority Total
funds premium interest equity
Rm
Balance at 1 January 2006 32 931 2 991 5 770 41 692
Change in accounting policy (276) (126) (402)
Restated balance at
1 January 2006 32 655 2 991 5 644 41 290
Total recognised income
and expenses 13 619 269 1 968 15 856
Profit for the year 10 518 269 1 723 12 510
Items accounted for directly
in reserves 3 101 245 3 346
Currency translation movement
and hedging 2 173 10 2 183
Cash flow hedging and
available-for-sale
revaluations 965 965
Change in shareholding of
subsidiaries (133) (315) (448)
Other reserve movements 96 550 646
Issue of share capital and
premium 299 2 512 57 2 868
Share buy-backs (102) (102)
Net dividends paid (3 555) (269) (1 380) (5 204)
Balance at 31 December 2006 42 916 5 503 6 289 54 708
Balance at 1 January 2007 42 916 5 503 6 289 54 708
Total recognised income and
expenses 14 293 450 3 896 18 639
Profit for the year 13 651 450 2 471 16 572
Items accounted for directly
in reserves 642 1 425 2 067
Currency translation movement
and hedging 155 (52) 103
Cash flow hedging and
available-for-sale
revaluations 194 194
Change in shareholding of
subsidiaries 665 1 384 2 049
Other reserve movements (372) 93 (279)
Issue of share capital
and premium 300 73 373
Share buy-backs 626 (455) 171
Net distributions paid (4 464) (450) (541) (5 455)
Balance at 31 December 2007 53 671 5 503 9 262 68 436
Consolidated balance sheet
as at 31 December
%
Rm change 2007 2006
Assets
Cash and balances with central banks 44 20 618 14 343
Financial investments, trading and pledged
assets 9 331 596 303 343
Loans and advances 29 646 781 502 519
Loans and advances to banks 10 98 631 89 785
Loans and advances to customers 33 548 150 412 734
Investment property 13 14 937 13 200
Derivative and other assets 19 141 968 118 850
Interest in associates and joint ventures 43 12 293 8 584
Goodwill and other intangible assets >100 6 666 2 374
Property and equipment 38 7 216 5 242
Total assets 22 1 182 075 968 455
Equity and liabilities
Equity 25 68 436 54 708
Equity attributable to ordinary
shareholders 25 53 671 42 916
Ordinary share capital 1 137 136
Ordinary share premium (47) 1 231 2 303
Reserves 29 52 303 40 477
Preference share capital and premium 5 503 5 503
Minority interest 47 9 262 6 289
Liabilities 22 1 113 639 913 747
Deposit and current accounts 29 705 843 545 164
Deposits from banks 42 72 372 51 093
Deposits from customers 28 633 471 494 071
Derivative, trading and other liabilities 10 200 691 182 115
Policyholders` liabilities 10 186 137 168 898
Subordinated debt 19 20 968 17 570
Total equity and liabilities 22 1 182 075 968 455
Contingent liabilities and capital commitments
as at 31 December
Rm 2007 2006
Letters of credit 14 299 9 133
Guarantees 31 916 23 367
Irrevocable unutilised facilities 47 172 51 436
93 387 83 936
Capital commitments
Contracted capital expenditure 161 309
Capital expenditure authorised but not yet contracted 4 156 1 682
4 317 1 991
Consolidated cash flow information
for the year ended 31 December
Rm 2007 2006
Net cash from operating activities 32 694 23 763
Net cash used in operating funds (14 956) (14 048)
Net cash used in investing activities (14 001) (13 511)
Net cash (used in)/from financing activities (1 115) 2 187
Private equity associates and joint ventures(1)
Rm 2007 2006
Cost 198 99
Carrying value 317 254
Fair value 383 274
Loans to associates and joint ventures 442 204
Equity accounted income 144 72
Other income from associates and joint ventures
Profit or loss on disposal of associates and joint
ventures
1 These associates and joint ventures are accounted
for using the equity method and are subject to the
headline earnings exemption for listed banks.
Major business acquisitions
BankBoston
Rm Argentina IBTC Nigeria
Date of acquisition 1 April 24 September
2007 2007
Percentage of voting equity instruments acquired(%) 76,68 50,10
Contribution to revenue if acquisition occurred
on 1 January 2007 1 378 1 099
Contribution to net profit if acquisition
occurred on 1 January 2007(1) 177 227
The details of the fair value of the assets and
liabilities acquired and goodwill arising
are as follows(2):
Cash and balances with central banks 1 796 1 514
Trading assets and financial investments 1 839 3 255
Loans and advances 9 865 3 922
Property, equipment, intangibles and other assets 690 1 263
Deposit and current accounts (12 589) (4 171)
Derivatives and other liabilities (835) (3 388)
Net asset value 766 2 395
Less: minority interest (355) (1 195)
Goodwill/(excess)(3) (382) 2 998
Cost of acquisition 29 4 198
Less: fair value of 49,9% of subsidiary effectively
disposed to minorities(4) (1 377)
Cash consideration paid 29 2 821
1 Excludes excess recognised as a goodwill gain.
2 Carrying amounts approximate fair values.
3 Goodwill represents the premium paid for control and excess represents
negative goodwill on acquisition.
4 Fair value of the equity instruments of the subsidiary was determined with
reference to the listed share price of IBTC Nigeria.
Financial statistics
for the year ended 31 December
%
change 2007 2006
Standard Bank Group
Number of ordinary shares in issue
(000`s)
end of period 1 256 916 1 224 856
weighted average 1 230 961 1 216 687
diluted weighted average 1 307 414 1 282 478
Cents per ordinary share
Headline earnings 23 1 033,4 837,4
Diluted headline earnings 22 973,0 794,4
Total distributions 21 386,0 320,0
Basic earnings 28 1 109,0 864,5
Diluted earnings 27 1 044,1 820,1
Net asset value 22 4 270 3 504
Financial performance (%)
ROE 26,7 27,4
Net interest margin 2,94 2,74
Credit loss ratio 0,79 0,60
Cost-to-income ratio 51,9 53,0
Cost-to-income ratio excluding capital
profit on MasterCard 52,4 53,2
Capital adequacy (%)
Capital ratio
Tier I capital 10,4 10,8
total capital 14,4 14,8
Declaration of dividends
Notice is hereby given that the following final dividends have been
declared:
Ordinary dividend No. 77 of 205 cents per ordinary share (share codes:
SBK and SNB, ISIN: ZAE000109815), payable on Monday, 14 April 2008, to ordinary
shareholders recorded in the books of the company at the close of business on
the record date, Friday, 11 April 2008. The last day to trade to participate in
the dividend is Friday, 4 April 2008. Ordinary shares will commence trading
ex-dividend from Monday, 7 April 2008.
6,5% first cumulative preference shares (first preference shares) dividend
No. 77 of 3,25 cents per first preference share (share code: SBKP, ISIN:
ZAE000038881), payable on Monday, 7 April 2008, to holders of first preference
shares recorded in the books of the company at the close of business on the
record date, Friday, 4 April 2008. The last day to trade to participate in the
dividend is Friday, 28 March 2008. First preference shares will commence
trading ex-dividend from Monday, 31 March 2008.
Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 7 of 482,03 cents per second preference share
(share code: SBPP, ISIN: ZAE000056339), payable on Monday, 7 April 2008, to
holders of second preference shares recorded in the books of the company at the
close of business on the record date, Friday, 4 April 2008. The last day to
trade to participate in the dividend is Friday, 28 March 2008. Second
preference shares will commence trading ex-dividend from Monday,
31 March 2008.
The relevant dates for the payment of the dividends are as follows:
6,5%
cumulative
preference shares
(First
Ordinary shares preference shares)
JSE Limited (JSE)
Share code SBK SBKP
ISIN ZAE000109815 ZAE000038881
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Dividend number 77 77
Dividend per share (cents) 205 3,25
Dividend payment dates
Last day to trade Friday Friday
"CUM" dividend 4 April 2008 28 March 2008
Shares trade Monday Monday
"EX" dividend 7 April 2008 31 March 2008
Record date Friday Friday
11 April 2008 4 April 2008
Payment date Monday Monday
14 April 2008 7 April 2008
Non-redeemable,
non-cumulative,
non-participating
preference shares
(Second
preference shares)
JSE Limited (JSE)
Share code SBPP
ISIN ZAE000056339
Dividend number 7
Dividend per share (cents) 482,03
Dividend payment dates
Last day to trade Friday
"CUM" dividend 28 March 2008
Shares trade Monday
"EX" dividend 31 March 2008
Record date Friday
4 April 2008
Payment date Monday
7 April 2008
Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 7 April 2008 and Friday, 11 April 2008, both days inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 31 March 2008 and Friday, 4 April 2008, both
days inclusive.
Where applicable, dividends in respect of certificated shares will be
transferred electronically to shareholders` bank accounts on the payment date.
In the absence of specific mandates, dividend cheques will be posted to
shareholders. Preference shareholders who have dematerialised their share
certificates will have their accounts at their CSDP or broker credited on
Monday, 7 April 2008. Ordinary shareholders who have dematerialised their share
certificates will have their accounts at their CSDP or broker credited on
Monday, 14 April 2008.
On behalf of the board
Loren Wulfsohn
Group secretary
Accounting policies
Basis of preparation
The abridged consolidated financial statements are prepared in accordance with,
and comply with International Financial Reporting Standards (IFRS) and the
South African Companies Act. The consolidated financial statements are prepared
in accordance with the going concern principle under the historical cost basis
as modified by the revaluation of certain assets and liabilities where required
or elected in terms of IFRS.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous year
except for:
The adoption of IFRS 7 Financial Instruments: Disclosures. This new standard
has not changed the recognition of financial instruments but has resulted in
the reclassification of certain financial assets and fee expenses.
The adoption of other accounting standards and interpretations issued with an
effective date of 1 January 2007. The adoption of these standards and
interpretations has not had a material effect on the results, nor has it
required any restatements of the results.
The early adoption of IFRS 8 Operating Segments. The standard has no impact
on the group`s results but has impacted the format of disclosure and
measurement of the results of reportable segments.
The early adoption of IFRIC 11 IFRS 2 Group and Treasury Share Transactions.
The group`s accounting treatment already complies with this interpretation and
it has therefore not impacted the group`s results or position.
The group changing its accounting policies relating to:
transactions with minority shareholders where the group purchases an
additional interest from minority shareholders or sells a portion of its
interest to minority shareholders, while the group controls the entities both
before and after the transaction. Any excess of the purchase consideration over
the group`s proportionate share of the additional net asset value of a
subsidiary acquired is now accounted for directly in equity. Previously, the
group accounted for the excess as goodwill. Any profit or loss on the partial
disposal of the group`s interest in a subsidiary is also accounted for directly
in equity. Previously, the group accounted for the profit or loss on partial
disposal in the income statement;
the measurement of investment guarantees, in terms of actuarial Practice
Guidance Note 110, on certain insurance contracts. The new model will more
accurately reflect fair value. The cumulative impact is not material to the
group`s results; and
certain modelling (valuation) changes in respect of insurance contracts.
These changes have influenced expected cash flows and ultimately liability
determined values as well as timing of profit recognition on the individual
insurance policies. The cumulative financial impact is not material.
Other reclassifications
Following a review of interest rate swap transactions, interest income has now
been set-off against corresponding interest expense amounts.
Audit opinion on the annual financial statements
These abridged financial statements have been extracted from the audited
financial statements on which KPMG Inc. and PricewaterhouseCoopers Inc. have
issued an unmodified audit report. This report is available for inspection at
the company`s registered office.
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
Directors:
DE Cooper (Chairman), SJ Macozoma (Deputy chairman), JH Maree*
(Chief executive), DDB Band, E Bradley, TS Gcabashe, DA Hawton,
SE Jonah KBE##, Sir Paul Judge#, KP Kalyan, RP Menell, Adv KD Moroka,
AC Nissen, MC Ramaphosa, MJD Ruck, MJ Shaw, Sir Robert Smith#, EM Woods
*Executive director #British ##Ghanaian
Group secretary:
L Wulfsohn
Registered office:
9th floor, Standard Bank Centre, 5 Simmonds Street, Johannesburg 2001
PO Box 7725, Johannesburg 2000
Share transfer secretaries in:
South Africa
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg 2001
PO Box 61051, Marshalltown 2107
Namibia
Transfer Secretaries (Proprietary) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek
PO Box 2401, Windhoek
Sponsor:
Standard Bank
www.standardbank.co.za
Date: 05/03/2008 07:55:01 Produced by the JSE SENS Department.
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