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SBK - Standard Bank Group - Audited Results and Distribution
Announcement for the Year Ended 31 December 2008
Standard Bank Group Limited
(Incorporated in the Republic of South Africa)
Registration No. 1969/017128/06
South African Share Code: SBK
Namibian Share Code: SNB
ISIN: ZAE000109815
Audited results and distribution announcement for the year ended 31 December
2008
Financial
Normalised IFRS objectives
2008
Return on equity (%) 18,2 19,1 21,0
Growth in net asset value per share
(%) 32,4 34,2
Headline earnings growth (%) 7,6 10,2
Headline earnings per share (cents) 942,6 1 002,0
Headline earnings per share growth (%) (1,9) (3,0) 16,3(1)
Distribution per share (cents) 386 386
Cost-to-income ratio (%) 49,2 49,3 =51,0
Credit loss ratio (%) 1,55 1,55 =1,00
1 Average South African inflation (CPIX) for 2008 of 11,3% plus 5%.
Overview of financial results
Standard Bank grew normalised headline earnings by 8% in 2008 to R14 150
million. This was achieved in a particularly difficult operating environment
characterised by high levels of volatility, declining asset prices and reduced
liquidity, particularly in the fourth quarter. The group`s diversified business
and strong capital position have allowed us to weather the turbulence in global
financial markets. Highlights of the 2008 results include strong organic
revenue growth despite the difficult operating conditions and meaningful
contributions from recent acquisitions in Nigeria and Argentina, both included
in the group`s results for a full year for the first time. The group`s prudent
approach to credit impairments has not changed during the year. All business
units and geographic regions were profitable in 2008.
The volatile operating conditions experienced during the year resulted in the
group not meeting the principal financial objectives set in March 2008. The
outlook for headline earnings per share growth was revised downward during the
year and in the market update provided in October 2008 it was projected that the
group`s normalised headline earnings for the year was likely to be similar to or
slightly higher than that for 2007.
Economic factors impacting the results
During 2008, the group experienced two distinct negative trends in its
operating environment:
- Globally, the systemic credit and liquidity crisis deepened as interbank and
wholesale funding markets stalled in the wake of fading confidence amongst
financial institutions. Significant deleveraging followed as financial
institutions realised assets to cover liquidity shortfalls, resulting in
dramatic repricing. The lack of liquidity and the dramatically reduced risk
appetite severely limited both the ability and willingness of global financial
institutions to finance normal corporate requirements, bringing about a
slowdown in market activity and a collapse in commodity prices. This market
turmoil and consequent loss of confidence resulted in investors withdrawing
funds from emerging markets and currencies devalued significantly. The South
African rand lost 37% against the US dollar in 2008.
- In South Africa interest and inflation rates were cyclically higher. The
prime interest rate was raised by 50 basis points on ten occasions between June
2006 and June 2008, peaking at 15,5% before the first 50 basis point rate cut
in December 2008. Consumer spending declined, hit by rising inflation driven by
higher energy and food prices and tighter borrowing conditions. During the
second half of the year, activity in the property and passenger car markets
dropped off significantly, with a 3% contraction in median property prices and
a 23% decline in new passenger vehicle sales. Corporate activity slowed towards
the end of the year as commodity prices weakened and demand softened in the
wake of the financial crisis in developed countries. The repricing of financial
assets impacted insurance operations significantly, as their earnings are
exposed to fair value adjustments in equity and debt markets.
South African banks were somewhat insulated from the global turmoil in 2008 due
to a combination of factors. South African banks have, typically, limited
exposure to exotic and highly geared products. They also have strong deposit
gathering franchises. South Africa`s strong regulatory framework has been
embedded in the operations of local banks, alongside robust risk management
practices including the implementation of Basel II during January 2008.
However, the fact that South Africa has not been immune to the consequences of
the global financial crisis is reflected in the substantially higher cost of
long-term funding, significantly altered pricing dynamics and securitisation
ceasing to be a financing option.
Key performance indicators
In this difficult environment the group achieved a return on equity of 19,1%,
headline earnings per share fell 3% to 1 002,0 cents per share and net asset
value per share rose 34%. Whereas these results are prepared on an IFRS basis,
normalised results make adjustments for two accounting anomalies (described
fully in the normalised results section below) that have distorted the results
from an economic perspective since 2004.
On a normalised basis, the group`s return on equity was 18,2%, headline earnings
per share declined 2% to 942,6 cents per share and net asset value per share
increased 32%.
The commentary that follows is based on the normalised results.
Other factors impacting results
- Subscription for shares by ICBC
On 3 March 2008, ICBC subscribed for 152,5 million newly issued ordinary shares
for an aggregate consideration of R15,9 billion. This new equity capital
provided additional income to boost earnings growth, but diluted return on
equity and growth in earnings per share. The group`s business co-operation with
ICBC is still gaining traction and progressing well. Much of the first year of
co-operation has involved relationship building, understanding our mutual
structures, exploring client opportunities and determining how best to co-
ordinate our efforts in China and the emerging markets in which we operate.
- Recent acquisitions
Standard Bank acquired controlling interests in BankBoston Argentina on 1 April
2007 and in IBTC Chartered Bank Plc in Nigeria on 24 September 2007. The
results of both these operations are included for the full period for the first
time, adding an incremental R393 million to group headline earnings in 2008. A
60% interest in CfC Bank (renamed CfC Stanbic Holdings) in Kenya was acquired
effective 1 June 2008 and had no material effect on earnings.
- Increased holding in Liberty
Standard Bank increased its effective holding in Liberty from 32,8% to 53,7%
during the year. Standard Bank wished to increase its effective economic
interest in Liberty as part of enhancing its portfolio of financial services
subsidiaries and to align its commercial and economic investment and benefits
so as to reflect the strategic and commercial contribution which it continues
to make to Liberty. The investment required to increase the holding was R4,4
billion.
Business units
Following many years of strong growth, the convergence of several negative
macro-economic factors affected our Personal & Business Banking division and,
although remaining profitable, headline earnings fell 16%. Despite this, a
healthy ROE of 19,9% was achieved and the cost-to-income ratio was further
improved to 51,3%.
Mortgage lending`s results were significantly adversely impacted by increases
in non-performing loans, lower new business volumes and margin pressure from
higher term funding costs. Instalment sale and finance leases experienced lower
new business volumes, increased arrears and falling recovery values. Card
products recorded pleasing growth in revenues, with higher merchant sales
turnover and cardholder balances, partly offset by increased credit losses.
Transactional and lending products recorded strong growth on the back of higher
deposit and loan balances, an expanding transactional account base,
particularly in the rest of Africa, and a positive endowment impact of higher
rates on transactional deposits. Earnings from bancassurance were marginally
lower due to reduced investment income in the bank`s short-term insurance
portfolios, higher lapse ratios and weaker investment returns. This was
partially offset by the inclusion of CfC Stanbic`s earnings for the first time.
Corporate & Investment Banking grew headline earnings 19% in a challenging
environment. An ROE of 22,2% was achieved and the cost-to-income ratio was
50,5%, down from 53,1% in the prior year.
In global markets strong performances were achieved in commodities and foreign
exchange trading, boosted by increased client activity, higher volatility and
wider spreads. Investment banking was impacted by the sharply declining market
values of listed property investments and unlisted debt and equity investments.
Provisions for credit losses increased substantially. These factors more than
offset the benefits of higher margins and strong growth in arranging and
advisory revenue. Transactional products and services recorded strong growth
from increased deposit balances, the positive endowment impact of higher rates
on transactional deposits, and an expanding client base in the rest of Africa.
Liberty`s earnings are closely aligned to investment markets and were
significantly impacted in the second half of the year by amongst others the JSE
Limited All Share Index being down 26% for the year under review. The high
inflation and interest rate environment placed strain on consumers` disposable
income and resulted in higher withdrawals and lapse rates on policies, which
also had a negative impact on earnings. However, improved mortality experience
had a positive impact. The effect on earnings of the reduction in long-term
interest rates towards the end of the year was mitigated by interest rate
hedges entered into during the last quarter. Liberty`s published headline
earnings of R1 619 million were 48% down on 2007 and Standard Bank`s share of
these earnings decreased 34% from R973 million in 2007 to R641 million for
2008, taking into account the increase shareholding in the more difficult
second half of the year.
Geographic analysis of results
Geographic breakdown of headline earnings
Headline Headline earnings
earnings contribution
Change 2008 2007 2008 2007
% Rm Rm % %
South Africa 1 10 916 10 801 77 82
South Africa (Banking activities) 5 10 275 9 828 72 75
South Africa (Liberty Life) (34) 641 973 5 7
Rest of Africa 46 1 862 1 273 13 10
Outside Africa 12 1 378 1 229 10 9
Central funding and eliminations (6) (150) (1)
Standard Bank Group 8 14 150 13 153 100 100
In addition to maintaining an intense focus on South Africa, the group`s
strategy of increasing earnings from other strategic emerging markets continues
to gain momentum. Earnings growth in our home market resulted from a strong
performance from transactional products and trading operations but was
restricted by credit impairments in consumer lending products and weaker equity
markets in the group`s insurance operations. Supported by the recent
acquisitions, our operations in the rest of Africa benefited from an enhanced
product offering, higher trading volumes and a focus on profitable
cross-selling opportunities. Operations outside Africa, where the effects of
the global financial crisis were most acutely felt, showed notable resilience
in achieving earnings of US$168 million, marginally lower than the prior
year, US$174 million. When translated into rand, earnings from this region were
up 12%.
Banking operations
Balance sheet analysis
Banking assets grew by 34% year on year. If the translation impact of the
weaker rand exchange rate is excluded this reduces to 23%.
Loans and advances
Loans and advances rose 24% on a group basis with growth of 12% in Personal &
Business Banking. Growth in mortgage loans slowed to 15% in 2008 from 29% in
2007 due to a weaker property market and stricter acceptance criteria. The
total annual value of new mortgage business reduced by 32%. Overall growth of
the mortgage book was however supported by a decrease in customers` prepayment
rates and lower cancellations. Instalment sale and finance leases were only up
2%: a downturn in the light passenger vehicle market resulted in a reduction of
30% in new loans granted in the motor book. The value of new business in the
non-motor book reduced by 1% leading to a motor/non-motor book ratio of 71%/29%
(2007: 74%/26%). Growth in card debtors originated mainly from our operation in
Argentina as the local book showed no growth.
Market share in the key Personal & Business Banking segments in South Africa
have changed as follows from a year ago:
- Mortgage advances increased from 25,7% to 26,6%;
- Instalment finance fell from 23,0% to 21,6%;
- Card debtors were lower, falling from 36,0% to 34,8%; and
- Deposits declined slightly from 27,5% to 26,9%.
Loans and advances in Corporate & Investment Banking grew 39% (22% excluding
the translation effect of the weaker rand) with growth of 40% in South Africa,
57% in the rest of Africa and a 3% decline (exchange rate adjusted) outside
Africa. Strong growth occurred in term lending as a number of large structured
lending deals were concluded in the first half of the year. Within Corporate &
Investment Banking advances growth of 39%, loans to banks increased 40% as a
result of surplus liquidity placements with other banks.
Net asset value
Net asset value grew by R27,5 billion or 47% in 2008 to R85,9 billion. In
addition to the R15,9 billion of equity raised by the issue of shares to ICBC,
earnings of R14,1 billion were recorded plus a further R5,2 billion of currency
translation and associated hedging gains accounted for directly in reserves.
Dividends of R6,1 billion were paid to ordinary shareholders.
Income statement analysis
Net interest income
Net interest income was up 40% and the group`s interest margin widened to 3,32%
from 2,95% in 2007. Excluding the impact of recent acquisitions, net interest
income was up 34%. Strong income growth was achieved in Personal & Business
Banking of 29% and in Corporate & Investment Banking of 55%. The interest
margins increased to 5,15% (2007: 4,75%) and 1,83% (2007: 1,54%) respectively.
Growth in Personal & Business Banking was mainly due to the positive endowment
impact of a higher average prime rate on low-earning deposits, lower average
concession rates on new mortgage loans and instalment sale and finance leases,
and an increase in the unwind to interest income of the discount component of
expected recoveries on non-performing loans. Corporate & Investment Banking
posted strong lending growth, benefiting from recent acquisitions and the weaker
rand exchange rate. Wider lending spreads were partially diluted by higher
wholesale funding costs and a group wide focus on improving the long-term
funding ratio. The endowment effect on capital assisted the overall margin by 19
basis points.
Non-interest revenue
Non-interest revenue grew 19%, with a meaningful contribution from recent
acquisitions. Growth excluding recent acquisitions was 11%.
Net fee and commission revenue grew 21%. Within Personal & Business Banking,
increases in account transaction fees in South Africa were restricted to 4,6%.
As a result, growth in this category was limited to 13%, driven by a 9%
increase in the number of current accounts in South Africa and strong
transactional volume growth across the expanding branch network in Africa.
Card-based fees rose 13%, assisted by higher merchant turnover despite a 3%
reduction in the cardholder base in South Africa. Corporate & Investment
Banking lifted advisory fees by 49% on the back of strong growth in fee income
in Africa and higher corporate and structured finance advisory deal volumes in
the first half of the year. Limited activity in the international debt capital
and securitisation markets restricted income from these sources.
Trading revenue increased 31%. Operations in the rest of Africa posted an
excellent trading result, doubling trading revenue. Higher client trading
volumes in foreign exchange and debt securities contributed to this
performance. In South Africa, trading revenue was up 16%, with good
performances from commodities and foreign exchange trading assisted by higher
volatility. This was somewhat offset by a slowdown in fixed income trading due
to negative market sentiment and lower deal flow. Trading revenue outside
Africa grew 7% as a robust performance from trading in commodities and local
currencies was diluted by a weaker trading result in equities.
Other non-interest revenue was 21% lower following downward fair value
movements in the group`s listed property investments from the high base of the
comparative period. Income from insurance-related activities benefited from the
newly acquired insurance operations within CfC Stanbic Holdings and growth in
bancassurance commission but fair value adjustments on the equity portfolio
constrained the insurance result. Profit on the partial realisation of Visa
shares amounted to R123 million. The comparative number for 2007 includes R459
million realised on MasterCard shares. Profit realised on these
available-for-sale instruments was excluded from headline earnings.
Credit impairments
Credit impairments increased by 147%: 117% in Personal & Business Banking, 559%
in Corporate & Investment Banking and 399% centrally, where a R500 million
impairment has been created to cater for credit losses in the group`s credit
portfolios due to the continued significant volatility and uncertainty in
international and local markets, the severe slowdown in economic growth and the
associated risks of unemployment and corporate default. The credit loss ratio
worsened to 1,55% from 0,80%.
Within Personal & Business Banking, credit losses in the current interest rate
cycle have worsened due to lower disposable income amongst consumers following
sharp increases in food and energy inflation earlier in the year. Economic
conditions for mortgage loan customers worsened progressively during 2008,
intensifying the difficulty they experienced in meeting contractual repayments.
Within mortgages, the credit loss ratio escalated to 1,49% from 0,54%. Recovery
values are under pressure as property prices fell by 3%.
Credit impairment charges for instalment sale and finance leases were up 83%
and the credit loss ratio increased to 2,48% from 1,54% in 2007. The ratio
reflects a reduction of expected recoveries to 40% in 2008 from 48% in 2007, as
the used car market became saturated due to an increase in delinquencies.
Credit impairment charges relating to card debtors grew 48% and the credit loss
ratio deteriorated to 9,53% (2007: 7,24%).
The credit loss ratio in Corporate & Investment Banking increased to 0,46% in
2008 from a low base of 0,10% in 2007. This included increased impairments for
loans identified as non-performing in sectors where stresses are evident and
newly-created portfolio impairments for performing loans to cater for the
evidently worsening economic conditions.
We continue to re-evaluate the depth and expected duration of the current
downturn to ensure the appropriate strategies are in place.
These include a heightened focus on early identification of problem accounts,
collection capability and efficiencies, proactive rehabilitation policies and
processes. We are nevertheless currently originating quality new business.
Operating expenses
The banking group`s cost-to-income ratio improved to 49,2% (2007: 51,6%). The
consolidation of recently acquired entities drove banking activities` cost
growth to 23% (14% excluding acquisitions). Operating expenses in South Africa
were well contained and grew at 7,5%, well below South African inflation.
Staff costs were 17% higher in total and 9% up excluding recent acquisitions.
Despite including new staff in Kenya for the first time and an increase in debt
management staff required to cater for increased delinquency volumes, headcount
increased by only 2%, following initiatives to contain headcount in South
Africa. Staff numbers in selected client-facing growth areas in the rest of
Africa were increased to manage higher business volumes. Performance-based
remuneration was reduced as a percentage of salary costs in response to the
current market environment and group results.
Other operating expenses were up 32% with the increase in expenses in South
Africa being well controlled at 8%. In line with the group`s growth strategy in
the rest of Africa and outside Africa recent acquisitions contributed a third
to overall cost growth. The devaluation of the rand further contributed to the
growth in expenses outside Africa. IT costs increased by 28% as maintenance
costs, consultancy fees and software licensing expenses were incurred to
maintain, enhance and expand the core network. Depreciation and amortisation
increased 72% following implementation of new IT infrastructure and systems,
impairment of redundant technology and amortisation of intangible assets
identified on new acquisitions. Premises costs were 22% higher resulting from
business growth outside of South Africa, rental escalations and utility tariff
increases.
Liquidity
Liquidity conditions in international money markets and debt capital markets
remained constrained during 2008, and ongoing risk aversion of investors
remains evident. In response to the adverse market conditions, heightened focus
was placed on the frequency and rigour of the application of prudent practices
within the bank`s liquidity management framework. The structural liquidity
mismatch was managed and maintained within best-practice banking guidelines.
Surplus liquidity buffers, comprising unencumbered and readily available
marketable assets, amounted to R97 billion as at 31 December 2008.
Capital and Basel II
The group implemented Basel II on 1 January 2008. Over the last year, we
significantly enhanced our internal economic capital and stress-testing
methodologies and improved and formalised our internal capital assessment
process.
The group`s capital adequacy ratio was bolstered by the ICBC capital injection
of R15,9 billion in March 2008, internally generated capital and proactive
management of the balance sheet. Total capital adequacy increased to 12,9%
(2007: 11,6%) and tier 1 capital adequacy improved to 10,7% (2007: 8,7%). The
economic capital coverage ratio, representing the extent to which minimum
economic capital requirements are covered by available financial resources was
1,93 times - indicating a substantially higher capital position relative to
risks assumed in banking activities. Domestically, the group redeemed tier 2
subordinated debt to the value of R2 billion. The decision not to replace the
tier 2 debt was informed by the group`s strong tier 1 capital position and
prevailing market conditions.
Distributions
The group`s policy of a distribution cover ratio of 2,5 times has not changed.
However, given the marginal reduction in headline earnings per share, the board
has decided to maintain the group`s total distribution per share at the same
level as the prior year, resulting in a distribution cover ratio of 2,4 times
for 2008. In addition, the board has declared a scrip distribution with a cash
alternative. It was considered important to utilise a scrip distribution to
incrementally raise capital given that asset growth is continuing and alternate
sources of capital are currently limited.
A final distribution of 193 cents per share has been declared, bringing the
total distribution declared in respect of 2008 to 386 cents per share. A
circular relating to the scrip distribution will be posted to shareholders in
due course.
Financial Sector Charter
We continue to support the harmonisation process undertaken by the financial
sector and other stakeholders to achieve the alignment of the Financial Sector
Charter (FSC) to the Broad-based Black Economic Empowerment Codes of Good
Practice legislated in 2007. The bank maintained an "A" rating in the overall
FSC Scorecard with an improvement in the area of employment equity. Black
managers now comprise more than 51% of the bank`s management in South Africa,
of which 53% are female.
Prospects
We expect the extremely difficult operating conditions to continue, posing
significant challenges for our customers and our industry. Global confidence
in financial markets is unlikely to improve in the short term.
Operations outside of South Africa should continue to benefit from synergies
with the South African operations and opportunities in local markets. In South
Africa it is likely that consumers will remain under pressure as unemployment
and lower economic growth exacerbate financial stresses despite the relief
provided by the current downward trend in interest rates. Lower commodity
prices and a slowdown in activity will pose challenges for South African
corporates.
We are committed to continue deepening our client relationships and staying
alert to opportunities as they arise. We do not underestimate the challenges of
the external environment but we believe our businesses are resilient and we are
pursuing our focused strategy with strength and confidence. We continue
judiciously to seek growth opportunities in our chosen markets to enhance the
group`s long-term prospects.
In light of the prevailing volatility of financial markets, the group has not
published financial objectives for 2009. In these tough global economic
conditions the group will continue to exercise caution and to ensure that sound
risk management practices are maintained and enhanced. In light of the above
circumstances, the board considers that producing similar results in 2009 to
those achieved in 2008 would be an acceptable outcome.
Jacko Maree
Chief executive
Derek Cooper
Chairman
Johannesburg
4 March 2009
Normalised results
With effect from 2004, we have adjusted the group`s results reported under
International Financial Reporting Standards (IFRS) for two required accounting
conventions that do not reflect the underlying economic substance of
transactions. Consistent with prior years, to arrive at the normalised results
the IFRS results have been adjusted for the following items:
- preference share funding for the group`s Black Economic Empowerment Ownership
initiative (Tutuwa) transaction that is deducted from equity and reduces the
shares in issue in terms of IFRS; and
- group companies` shares held for the benefit of Liberty Life policyholders
that result in a reduction of the number of shares in issue and the exclusion
of fair value adjustments and distributions on these shares. The IFRS
requirement causes an accounting mismatch between income from investments and
changes in policyholders` liabilities.
Two recent transactions reduced the extent of the normalised adjustments
relating to Tutuwa:
- In December 2007, the group externalised R1 billion of preference share
financing provided in terms of the Tutuwa initiative, resulting in the release
of 24,7 million ordinary shares previously deemed by IFRS to be "treasury
shares"; and
- In March 2008, Tutuwa participants sold 11,1% of their shares to ICBC, partly
using the proceeds for the repayment of their preference share liability,
thereby releasing a further 11,0 million ordinary shares previously deemed by
IFRS to be "treasury shares".
The result of these adjustments is shown in the table below:
Normalised headline earnings
Weighted Growth on
average number Headline 31 December
of shares earnings 2007
`000 Rm %
Disclosed on an IFRS basis 1 398 866 14 017 10
Tutuwa initiative 65 376 227
- Initial transaction 99 190
- External financing (24 691)
- Disposal of shares to ICBC (9 123)
Group shares held for the benefit
of Liberty Life policyholders 36 884 (94)
Normalised 1 501 126 14 150 8
Abridged audited results prepared in accordance with IFRS
Consolidated income statement
for the year ended 31 December
%
Rm change 2008 2007
Income from banking activities 30 61 366 47 296
Net interest income 42 31 918 22 549
Non-interest revenue 19 29 448 24 747
Income from investment management
and life insurance activities (53) 23 359 49 834
Total income (13) 84 725 97 130
Credit impairment charges 147 11 342 4 590
Benefits due to policyholders (68) 11 997 37 153
Income after credit impairment charges
and policyholders` benefits 11 61 386 55 387
Operating expenses in banking activities 23 30 390 24 706
Operating expenses in investment
management and life insurance activities 13 8 423 7 423
Net income before goodwill (3) 22 573 23 258
Goodwill impairment/(gain) 5 (376)
Net income before associates and joint ventures (5) 22 568 23 634
Share of profit from associates
and joint ventures (25) 268 355
Net income before indirect taxation (5) 22 836 23 989
Indirect taxation 17 1 382 1 185
Profit before direct taxation (6) 21 454 22 804
Direct taxation (25) 4 705 6 232
Profit for the year 1 16 749 16 572
Attributable to minorities (7) 2 288 2 471
Attributable to preference shareholders 18 529 450
Attributable to ordinary shareholders 2 13 932 13 651
Basic earnings per share (cents) (10) 995,9 1 109,0
Diluted earnings per share (cents) (8) 962,2 1 044,1
Headline earnings
for the year ended 31 December
%
Rm change 2008 2007
Group profit attributable to ordinary
shareholders 2 13 932 13 651
Headline earnings adjustable items added back
/(reversed) 126 (966)
Goodwill impairment/(gain) - IFRS 3 5 (376)
Profit on sale of property and equipment - IAS 16 (16) (61)
Impairment of property and equipment - IAS 16 84 10
Impairment of associates - IAS 28 139
Gains on disposal of businesses and
divisions - IAS 27 (24) (6)
Impairment of intangibles - IAS 38 132 26
Fair value gains on available-for-sale
assets - IAS 39 (194) (559)
Tax (13) 32
Minority shareholders (28) 4
Headline earnings 10 14 017 12 721
Segment report
for the year ended 31 December
%
Rm change 2008 2007
Revenue contribution by business unit
Personal & Business Banking 24 33 503 27 044
Corporate & Investment Banking 32 26 191 19 769
Central and other >100 1 871 830
Banking activities 29 61 565 47 643
Liberty Life (54) 23 136 50 320
Standard Bank Group - Normalised (14) 84 701 97 963
Adjustments for IFRS 24 (833)
Standard Bank Group - IFRS (13) 84 725 97 130
Profit and loss attributable to
ordinary shareholders
Personal & Business Banking (19) 4 611 5 723
Corporate & Investment Banking 18 7 937 6 746
Central and other 37 876 639
Banking activities 2 13 424 13 108
Liberty Life (34) 641 975
Standard Bank Group - Normalised 14 065 14 083
Adjustments for IFRS (133) (432)
Standard Bank Group - IFRS 2 13 932 13 651
Consolidated balance sheet
at 31 December
%
Rm change 2008 2007(1)
Assets
Cash and balances with central banks 25 25 697 20 618
Financial investments, trading and
pledged assets 346 859 347 453
Loans and advances 24 787 934 634 675
Loans and advances to banks 40 129 890 92 515
Loans and advances to customers 21 658 044 542 160
Investment property 12 16 771 14 937
Derivative and other assets 117 299 476 138 138
Interest in associates and joint ventures (43) 6 990 12 293
Goodwill and other intangible assets 50 10 180 6 796
Property and equipment 35 9 746 7 216
Total assets 27 1 503 653 1 182 126
Equity and liabilities
Equity 99 501 68 506
Equity attributable to ordinary
shareholders 53 81 953 53 671
Ordinary share capital 12 153 137
Ordinary share premium >100 16 844 1 231
Reserves 24 64 956 52 303
Preference share capital and premium 5 503 5 503
Minority interest 29 12 045 9 332
Liabilities 26 1 404 152 1 113 620
Deposit and current accounts 24 843 815 680 097
Deposits from banks 26 129 055 102 040
Deposits from customers 24 714 760 578 057
Derivative, trading and other liabilities 62 366 737 226 418
Policyholders` liabilities (8) 172 069 186 137
Subordinated debt 3 21 531 20 968
Total equity and liabilities 27 1 503 653 1 182 126
1 Restated as described below.
Consolidated cash flow information
for the year ended 31 December
Rm 2008 2007(1)
Net cash from operating activities 28 559 27 953
Net cash used in operating funds (21 901) (10 215)
Net cash used in investing activities (10 885) (10 616)
Net cash from/(used in) financing activities 7 550 (1 115)
1 Restated as described below.
Statement of changes in equity
for the year ended 31 December
Ordinary Preference
shareholders` share capital Minority Total
Rm equity and premium interest equity
Balance at 1
January 2007 42 916 5 503 6 289 54 708
Total recognised
income and expense 13 628 450 2 512 16 590
Profit for the year 13 651 450 2 471 16 572
Items accounted
for directly
in reserves (23) - 41 18
Currency translation
movement and hedging 155 - (52) 103
Cash flow hedging
and available-for-sale
reserves (423) - - (423)
Equity-settled
share-based payment
transactions 217 - 36 253
Other reserve movements 28 - 57 85
Issue of share
capital and premium 300 - 73 373
Net decrease/(increase) in
treasury shares 626 - (455) 171
Transactions with
minority shareholders 665 - 1 384 2 049
Net distributions paid (4 464) (450) (541) (5 455)
Balance at 31
December 2007
as previously reported 53 671 5 503 9 262 68 436
Finalisation of
purchase price
allocation in
terms of IFRS 3 - - 70 70
Restated balance at
31 December 2007 53 671 5 503 9 332 68 506
Balance at 1
January 2008 53 671 5 503 9 332 68 506
Total recognised
income and expense 19 146 529 3 603 23 278
Profit for the year 13 932 529 2 288 16 749
Items accounted
for directly in reserves 5 214 - 1 315 6 529
Currency
translation movement
and hedging 4 238 - 1 340 5 578
Cash flow hedging
and available-for-sale
reserve 751 - (31) 720
Equity-settled
share-based
payment transactions 217 - 35 252
Other reserve movements 8 - (29) (21)
Issue of share
capital and
share premium 16 132 - - 16 132
Share buy-backs (503) - - (503)
Net decrease in
treasury shares 1 483 - 906 2 389
Transactions with
minority shareholders (2 198) - (982) (3 180)
Net dividends paid (5 778) (529) (814) (7 121)
Balance at 31
December 2008 81 953 5 503 12 045 99 501
Financial statistics
for the year ended 31 December
%
change 2008 2007
Number of ordinary shares in issue
(000`s)
- end of period 14 1 430 618 1 256 916
- weighted average 14 1 398 866 1 230 961
- diluted weighted average 11 1 447 886 1 307 414
Cents per ordinary share
Headline earnings (3) 1 002,0 1 033,4
Diluted headline earnings (1) 968,1 973,0
Total distributions 386,0 386,0
Basic earnings (10) 995,9 1 109,0
Diluted earnings (8) 962,2 1 044,1
Net asset value 34 5 729 4 270
Financial performance (%)
ROE 19,1 26,7
Net interest margin 3,31 2,93
Credit loss ratio 1,55 0,80
Cost-to-income ratio 49,3 51,9
Capital adequacy (%)
Capital ratio
- tier I capital 10,7 8,7
- total capital 12,9 11,6
Private equity associates and joint ventures
Rm 2008 2007
Cost 308 198
Carrying value 411 317
Fair value 516 383
Loans to associates and joint ventures 719 442
Equity accounted income 119 144
Major business acquisitions
CfC Stanbic
Holdings Limited
Date of acquisition 1 June 2008
Percentage of voting equity instruments acquired (%) 60
Contribution to revenue since acquisition (Rm) 551
Contribution to net profit before tax since acquisition (Rm) 146
Contribution to revenue if acquisition occurred on 1
January 2008 (Rm) 944
Contribution to net profit before tax if acquisition
occurred on 1 January 2008 (Rm) 251
CfC Stanbic Holdings Limited
Fair Carrying
Rm value amount
Cash and balances with central banks 329 329
Financial investments 1 833 1 859
Loans and advances 2 464 2 470
Property, equipment, intangibles and other assets 1 241 996
Deposit and current accounts (3 145) (3 145)
Other liabilities and deferred tax (1 965) (1 928)
Net asset value 757 581
Less: minority interest (362)
Goodwill(1) 933
Cost of acquisition 1 328
Less: fair value of 36,3% of subsidiary effectively
disposed to minorities(2) (603)
Cash consideration paid 725
1 Goodwill represents the premium paid for control.
2 Fair value of the equity instruments of the subsidiary was determined with
reference to the listed share price of CfC Bank Limited.
Contingent liabilities and capital commitments
as at 31 December
Rm 2008 2007
Letters of credit 16 521 14 299
Guarantees 34 680 31 916
Irrevocable unutilised facilities(1) 10 881 30 898
62 082 77 113
Contracted capital expenditure 2 059 161
Capital expenditure authorised but not yet contracted 9 117 4 156
11 176 4 317
1 Restated as described below.
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.
Distributions
Ordinary shareholders
Payment of a scrip distribution with a cash dividend election.
Notice is hereby given that the directors have resolved to issue fully paid
ordinary shares in the company as a scrip distribution to ordinary
shareholders. Fully paid ordinary shares of 10 (ten) cents each will be issued
as a scrip distribution, payable to ordinary shareholders recorded in the
register of Standard Bank Group on the record date, being Friday, 3 April 2009.
Ordinary shareholders will be entitled, in respect of all or part of their
shareholding, to elect to receive a cash dividend of 193 cents per ordinary
share in lieu of the scrip distribution, which will be paid only to those
ordinary shareholders who elect in respect of all or part of their
shareholding, on or before 12:00 on Friday, 3 April 2009, to receive the cash
dividend.
The cash dividend will be paid out of profits of Standard Bank Group while the
new ordinary shares to be issued pursuant to the scrip distribution will be
issued as a capitalisation issue by way of capitalisation of part of Standard
Bank Group`s share premium. The number of new ordinary shares to which ordinary
shareholders participating in the scrip distribution will become entitled, will
be determined in the ratio that 193 cents multiplied by 1,05 bears to the
volume weighted average price (VWAP) of ordinary shares in Standard Bank Group
on the JSE Limited (JSE) during the five-day trading period ending Thursday, 19
March 2009. Details of the ratio will be released on the Securities Exchange
News Service of the JSE (SENS) by no later than 11:00 on Friday, 20 March 2009
and published in the South African and Namibian press the following business
day.
Trading in the Strate environment does not permit fractions and fractional
entitlements. Accordingly, where an ordinary shareholder`s entitlement to new
ordinary shares calculated in accordance with the above formula gives rise to a
fraction of a new ordinary share, such fraction of a new ordinary share will be
rounded up to the nearest whole number where the fraction is greater than or
equal to 0,5 and rounded down to the nearest whole number where the fraction is
less than 0,5.
A circular relating to the scrip distribution and the cash dividend alternative
will be posted to shareholders on or about 9 March 2009.
Preference shareholders
Notice is hereby given that the following final dividends have been declared:
6,5% first cumulative preference shares (first preference shares) dividend No.
79 of 3,25 cents per first preference share, payable on Monday, 30 March 2009,
to holders of first preference shares recorded in the books of the company at
the close of business on the record date, Friday, 27 March 2009. The last day
to trade to participate in the dividend is Friday, 20 March 2009. First
preference shares will commence trading ex-dividend from Monday, 23 March 2009.
Non-redeemable, non-cumulative, non-participating preference shares (second
preference shares) dividend No. 9 of 545,04 cents per second preference share,
payable on Monday, 30 March 2009, to holders of second preference shares
recorded in the books of the company at the close of business on the record
date, Friday, 27 March 2009. The last day to trade to participate in the
dividend is Friday, 20 March 2009. Second preference shares will commence
trading ex-dividend from Monday, 23 March 2009. The salient dates and times for
the scrip distribution/dividends are as follows:
6,5%
cumulative
preference shares
Ordinary (First preference
Shares shares)
JSE Limited (JSE)
Share code SBK SBKP
ISIN ZAE000109815 ZAE000038881
Namibian Stock Exchange (NSX)
Share code SNB
ISIN ZAE000109815
Distribution/dividend per share (cents) 193 3,25
Circular and form of election Monday
posted to ordinary shareholders 9 March 2009
Announcement of the ratio applicable to the scrip
distribution, based on the five-day trading
period ending Thursday, 19 March 2009, Friday
released on SENS 20 March 2009
Announcement of the ratio applicable to the
scrip distribution published in the South Monday
African and Namibian press 23 March 2009
Last day to trade in order to be eligible for
the for the scrip distribution/cash dividend Friday Friday
("CUM" distribution) 27 March 2009 20 March 2009
Shares trade "EX" the scrip Monday Monday
distribution/dividend 30 March 2009 23 March 2009
Listing of the maximum possible number of ordinary
shares that could be issued in terms of the Monday
scrip distribution 30 March 2009
Last day to elect a cash dividend instead Friday
of the scrip distribution by 12:00 3 April 2009
Record date in respect of the scrip Friday Friday
distribution/cash dividend 3 April 2009 27 March 2009
Share certificates and dividend cheques posted and
posted and CSDP/broker accounts Monday Monday
credited/updated (Payment date) 6 April 2009 30 March 2009
Maximum number of new ordinary shares
listed adjusted to reflect the actual Tuesday
number of ordinary shares issued 7 April 2009
Non-redeemable,
non-cumulative,
non-participating
preference shares
(Second preference
shares)
JSE Limited (JSE)
Share code SBPP
ISIN ZAE000056339
Namibian Stock Exchange (NSX)
Share code
ISIN
Distribution/dividend per share (cents) 545,04
Last day to trade in order to be eligible for the scrip Friday
distribution/cash dividend ("CUM" distribution) 20 March 2009
Shares trade "EX" the scrip Monday
distribution/dividend 23 March 2009
Record date in respect of the scrip Friday
distribution/cash dividend 27 March 2009
Share certificates and dividend cheques posted and Monday
CSDP/broker accounts credited/updated (Payment date) 30 March 2009
Ordinary share certificates may not be dematerialised or rematerialised between
Monday, 30 March 2009 and Friday, 3 April 2009, both days inclusive.
Preference share certificates (first and second) may not be dematerialised or
rematerialised between Monday, 23 March 2009 and Friday, 27 March 2009, both
days inclusive.
All times provided in this announcement are South African local time.
The above dates and times are subject to change. Any changes will be released
on SENS and published in the South African and Namibian press.
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 (first and second) who have
dematerialised their share certificates will have their accounts at their CSDP
or broker credited on Monday, 30 March 2009. Ordinary shareholders who have
dematerialised their share certificates will have their accounts at their CSDP
or broker credited/updated on Monday, 6 April 2009.
On behalf of the board
Loren Wulfsohn
Group secretary
Accounting policies
Basis of preparation
The 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 fair value accounting of assets and liabilities where required
in terms of IFRS.
Changes in accounting policies
The accounting policies are consistent with those adopted in the previous year,
except as noted below. The group has early adopted the amendments to IAS 32
Financial Instruments: Presentation and IAS 1 Presentation of Financial
Statements - Puttable Financial Instruments and Obligations arising on
Liquidation. The amendment requires the classification of certain puttable
financial instruments and financial instruments that impose on the issuer an
obligation to deliver a pro-rata share of the entity only on liquidation as
equity. The amendment has had no significant effect on the 2008 results, nor
has it required any restatement of prior period results.
The group has early adopted the amendments to IAS 23 Borrowing Costs. The
group capitalised borrowing costs on all qualifying projects commencing on or
after 1 January 2008. The amendment resulted in the capitalisation of borrowing
costs amounting to R31 million in 2008, but has had no affect on the
comparative period.
As part of its annual improvements project, the International Accounting
Standards Board made amendments to a number of accounting standards. The group
adopted some of these amendments on 1 January 2008, which did not have a
significant effect on the 2008 results, nor has it required any restatement of
prior period results.
The following new accounting interpretations were effective 1 January 2008:
- IFRIC 12 Service Concession Arrangements; and
- IFRIC 14 - IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction.
The adoption of these interpretations has not had a material effect on the
results, nor has it required any restatements of comparative results.
Reclassifications and restatements
A project was undertaken during the year to align the balance sheet
classifications within which financial instruments are recognised to both the
group`s risk management and income recognition policies. During this project
the following classification changes were made:
- All items which are of a trading nature were moved into the trading assets or
liabilities classification. These included collateral and repurchase agreements
held for trading purposes.
- Financial instruments previously classified as other assets were moved to the
appropriate financial instrument classification.
- The analysis of balances between banks and non-banks was reviewed and
refined.
The allocation of goodwill and intangible assets on the acquisition of IBTC
Chartered Bank Plc, previously determined provisionally, was finalised in 2008
and the 2007 comparatives have been restated as if the initial accounting had
been completed from the acquisition date as required by IFRS 3 Business
Combinations. The finalisation of the purchase price allocation resulted in an
increase in intangible assets of R200 million and a resulting reduction in
goodwill of R70 million, after accounting for minority interest and taxation.
In line with international industry practice, the group has revised the format
of its cash flow statement, which was previously compiled on the direct basis,
to the indirect basis. In addition, limited reclassifications were made to
improve disclosure.
The group has reviewed and refined its definition of irrevocable facilities.
The comparative information has been amended accordingly.
The reclassifications did not impact equity attributable to ordinary
shareholders or profit for the period attributable to ordinary shareholders.
Standard Bank Group Limited
Registration No. 1969/017128/06
Incorporated in the Republic of South Africa
Directors: DE Cooper (Chairman), Kaisheng Yang** (Deputy chairman),
SJ Macozoma (Deputy chairman), JH Maree* (Chief executive),
DDB Band, E Bradley, TS Gcabashe, SE Jonah KBE##, Sir Paul Judge#, KP Kalyan,
Yagan Liu**, RP Menell, Adv KD Moroka, AC Nissen, MC Ramaphosa, MJD Ruck,
MJ Shaw, Lord Smith of Kelvin, Kt#, EM Woods
* Executive director ** Chinese # 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,
Johannesburg 2107
Namibia
Transfer Secretaries (Proprietary) Limited
Shop 8, Kaiserkrone Centre, Post Street Mall, Windhoek. PO Box 2401, Windhoek
Independent sponsor
Deutsche Securities (SA) (Proprietary) Limited
Joint sponsor
Standard Bank
Investors are referred to www.standardbank.co.za where a detailed analysis of
the group financial results, including an income statement and balance sheet for
The Standard Bank of South Africa Limited (SBSA), can be found. Investors will
be notified via the Securities Exchange News Service of the JSE ("SENS") when
the audited annual financial statements for the group and SBSA are available
online. This is expected to be towards the end of April.
Date: 05/03/2009 08:00:02 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
